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LYONS'  BOOKKEEPI 


Complete 


LYONS'  BOOKKEEPING 


EDITION  OF  1913 


PARTS  I  AND  II 


BY 

J.  A.  LYONS 

AND 

WALTER  L.  READ 


LYONS    y    CARNAHAN 

CHICAGO  NEW   YORK 


H1^5{o35 


i1  fj 


Copyrighted  1909  by 
J.  A.  Lyons  &  Company 


Copyrighted  1910  by 
J.  A.  Lyons  &  Company 


EDUCATION  PfcH, 


Copyrighted  1913  by 
Lyons  &   Carnahan 


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PREFACE 

The  plan  of  teaching  bookkeeping  with  business  papers  is  a  very  popular  one  and 
must  continue  to  be  the  favorite  plan  for  those  who  wish  the  course  to  give  the  student, 
in  addition  to  a  knowledge  of  the  principles  of  accounting,  a  familiarity  with  the  ma- 
terials and  the  methods  of  a  modern  business  office. 

There  are  in  general  two  schemes  for  teaching  bookkeeping  by  the  individual  "busi- 
ness practice"  plan.  The  one  scheme  involves  the  use  of  business  papers  solely  to  accom- 
pany and  illustrate  the  transactions  set  forth  in  the  text.  The  other  uses  the  business 
papers  as  the  basis  of  the  student's  entries  in  his  books. 

There  is  a  vast  difference  between  these  two  plans.  The  former  plan  makes  the  business 
papers  a  subordinate  and  auxiliary  feature  of  the  work  that  can  be  and  often  is  slighted 
if  not  absolutely  ignored.  The  latter  plan  makes  the  business  papers  the  foundation  of 
the  course.  The  papers  come  to  the  student  just  as  they  come  to  him  in  business;  from 
the  data  upon  them  he  constructs  his  bookkeeping  entries;  and  they  are  then  systemati- 
cally filed  and  become  a  part  of  the  records.  Thus  business  papers,  a  knowledge  of  which 
is  in  itself  of  value,  constitute  the  central  feature  of  the  course,  and  the  student,  through 
receiving  them,  making  his  entries,  and  disposing  of  them,  is  taught  business  procedure, 
accounting,  and  office  methods. 

The  plan  of  using  business  papers  as  the  basis  of  the  presentation  of  the  transactions 
is  the  one  which  is  followed  in  the  business  practice  sections  of  Lyons'  Bookkeeping 
and  these  business  practice  sections  constitute  the  greater  part  of  the  course.  The  trans- 
actions are  not  merely  illustrated  by  business  papers,  but  they  are  based  upon  business 
papers. 

Preceding  each  of  the  principal  sets  using  the  business  papers,  a  shorter  section  of  the 
book,  in  which  papers  are  not  used,  is  devoted  to  a  treatment  of  the  accounting  principles 
which  will  be  involved  in  the  work  which  is  to  follow.  Thus,  the  student  attempts  no 
work  whatever  in  "business  practice"  until  he  has  mastered  a  short  chapter  without 
business  papers  in  which  he  studies  accounts  and  journalizing,  and  learns  how  to  post 
and  take  a  trial  balance.  Again,  before  taking  up  the  work  of  the  second  principal  set, 
he  studies  in  a  separate  chapter,  no  business  papers  being  used,  the  new  accounting  features 
which  he  will  use  in  the  second  practice  set.  This  plan  of  teaching  accounting  principles 
in  separate  chapters  preceding  the  business  practice  sections  dnd  without  the  business 
papers,  presents  two  distinct  advantages:  first,  the  student  is  enabled  to  concentrate 
upon  the  study  of  the  accounting  principles  without  any  distraction,  until  he  gets  a  thor- 
ough intellectual  knowledge  of  the  principles  studied;  second,  the  accounting  principles 
being  intellectually  acquired  when  the  student  takes  up  the  "business  practice,"  the 
work  of  familiarizing  the  student  with  forms  and  driUing  him  in  the  bookkeeping  operations 
can  proceed  without  interruption. 

The  student  will  find  every  step  explained  in  detail  both  as  to  the  principle  involved 
and  the  procedure  followed.  Every  difficulty  is  anticipated.  There  are  no  pitfalls — 
no  ambiguities.  We  have  avoided  the  introduction  of  puzzles  and  conundrums.  The 
pupil  has  the  right  to  know  what  every  proposition  is,  and  this  right  is  respected  through- 
out— he  is  not  left  to  guess  the  intent  of  the  authors.  Nor  is  it  presumed  that  he  knows 
any  of  these  things  which  he  cannot  know  without  schooling  or  business  experience.  The 
book  was  written  for  beginners  and  it  is  felfc  that  it  meets  fully  the  requirements  of  such 
a  text  book. 


54rJ42 


PREFACE  TO  EDITION  OF  1913 

Bookkeeping  has  been  called  "applied  arithmetic,"  and  for  years  there  has  been  a 
growing  tendency  to  teach  bookkeeping  from  its  arithmetical  side.  The  Edition  of  1913 
recognizes  the  truth  that  an  account  is  nothing  more  nor  less  than  a  formal  statement 
of  a  proposition  in  arithmetic,  and  that  the  simple  and  only  proper  method  of  account 
study  is  that  which  approaches  the  account  from  its  arithmetical  side.  The  account  is, 
therefore,  approached  in  this  way  in  the  Edition  of  1913. 

It  has  not  been  considered  sufficient  to  call  attention,  through  footnotes  and  in  other 
ways,  to  the  analogies  between  bookkeeping  and  arithmetic.  The  first  70  pages  of  Lyons' 
Bookkeeping  have  been  entirely  remade  in  order  to  work  out  the  arithmetical  approaches 
to  the  different  accounts  and  statements  in  practical  detail.  Preceding  the  study  of  each 
account  and  each  statement  the  student  is  given  a  list  of  problems  in  arithmetic  which 
lead  him  into  an  understanding  of  the  theory  of  that  account  or  statement  before 
he  undertakes  the  study  of  it  as  bookkeeping.  Thus  the  pedagogical  principle  of  going 
from  the  known  to  the  unknown  is  made  fully  available,  and  the  problems  themselves 
are  made  an  integral  part  of  the  course,  and  not  supplementary.  Students  will  not  secure 
the  benefits  of  this  carefully  devised  unfolding  of  the  subject  of  bookkeeping,  however, 
unless  teachers  fully  grasp  the  pedagogical  idea  underlying  it.  Treated  as  supplementary 
work  merely,  these  problems  will  fail  of  their  purpose. 

Up  to  page  179,  the  Edition  of  1913  differs  in  no  respect  from  the  original  edition, 
except  for  the  inclusion  of  the  groups  of  problems  found  on  pages  6,  10,  14,  16,  19,  22,  25, 
27,  31,  33,  64  and  66.  These  problems  have  added  eight  pages  to  the  length  of  the  book, 
but  they  have  been  put  in  where  they  belong  without  the  change  of  a  word  or  figure  else- 
where. 

The  last  set  in  the  book  (the  Drj^  Goods  set)  has  been  changed  so  as  to  require  the 
use  of  the  separate  merchandise  accounts  instead  of  one  general  account  only.  These  are 
the  Mdse.  Sales,  Mdse.  Purchases,  and  Mdse.  (Trading)  Accounts.  The  Sales  Book  and 
the  Purchase  Book  are  both  used  in  this  set,  thus  making  a  complete  classification  of  original 
entries  affecting  the  merchandise  account.  It  has  seemed  desirable  to  observe  the  same 
classification  in  the  ledger  accounts. 

A  clear  statement  of  the  extent  of  this  revision  has  been  thought  necessary  for  the 
information  of  teachers  who  are  using  the  original  edition,  who  are  assured  that  no  con- 
fusion can  result  from  the  use  of  the  two  editions  in  the  same  class  aside  from  the  minor 
detail  of  the  difference  in  paging. 


LYONS'   BOOKKEEPII^G 


CHAPTER   I 
ACCOUNTS 

Bookkeeping  is  the  science  of  making  a  systematic  record  of  business  transactions 
in  books. 

A  Set  of  Books  includes  all  the  books  necessary  to  contain  the  records  of  the  trans- 
actions of  a  particular  business.  This  includes  books  of  entry,  books  of  memorandum, 
and  books  of  account. 

The  Purpose  of  bookkeeping  is  to  enable  those  interested  to  ascertain  at  any  time 
the  condition  and  progress  of  the  business. 

The  Condition  of  the  business  is  its  net  worth.  This  is  shown  by  accounts.  The 
condition  of  a  business  in  its  different  parts  is  shown  by  separate  accounts.  These 
accounts,  taken  together,  show  the  condition  of  the  business  as  a  whole. 

The  Progress  of  the  business  is  its  net  gain  or  loss.  This  also  is  shown  by  accounts. 
The  separate  losses  and  gains  are  shown  by  separate  accounts.  These  separate  losses  and 
gains,  taken  together,  exhibit  the  total  loss  or  gain  of  the  business.  The  total  loss  or  gain 
for  a  given  period  of  time  can  also  be  found  by  comparing  the  condition,  or  worth  of  the 
business  at  the  end  of  that  period  with  the  worth  at  the  beginning  of  the  period. 

An  Account  is  a  list  of  items  of  a  certain  kind,  grouped  together  under  one  head  in 
order  to  show  a  result  of  some  one  part  of  the  business. 

The  Cash  account  shows  all  receipts  and  payments  of  cash. 

The  Notes  Receivable  account  shows  all  notes  of  other  persons  received  and  disposed  of. 

The  Notes  Payable  account  shows  all  our  notes  issued  and  redeemed. 

A  Personal  account  shows  all  transactions  with  a  given  person  on  account. 

The  Real  Estate  account  shows  all  real  estate  bought  and  sold. 

The  Merchandise  account  shows  all  merchandise  bought  and  sold. 

The  Expense  account  shows  all  costs  of  expense  items  (and  returns,  if  any). 

The  Interest  account  shows  all  losses  and  gains  from  interest. 

The  Proprietor's  account  shows  all  investments  and  withdrawals  by  the  proprietor. 

The  Loss  and  Gain  account  shows  the  separate  losses  and  gains. 

And  so  on. 

Some  accounts  exhibit,  by  their  results,  the  condition  or  worth  of  the  different  parts  of 
the  business. 

The  result  of  the  Cash  account  shows  the  amount  of  cash  on  hand. 

The  result  of  the  Notes  Receivable  account  shows  the  amount  of  notes  and  acceptances  on  hand. 
The  result  of  the  Notes  Payable  account  shows  the  notes  payable  outstanding  against  the  business. 
The  result  of  a  Personal  account  shows  how  much  the  person  owes  the  business  or  how  much  the 
business  owes  him. 

The  result  of  the  Proprietor's  account  shows  how  much  the  business  owes  to  the  proprietor. 
And  so  on. 

5 


'  y.. '.,'''.■  --<'  ACCOUNTS 

Some  accounts  show,  by  their  results,  the  progress  of  the  business  as  to  loss  or  gain. 
The  result  of  the  Real  Estate  account  shows  how  much  the  business  has  lost  or  gained  on  real  estate. 
The  result  of  the  Merchandise  account  shows  how  much  the  business  has   lost  or  gained  on  mer- 
chandise. 

The  result  of  the  Expense  account  shows  the  amcmnt  of  loss  for  expense  items. 
The  result  of  the  Interest  account  shows  the  loss  or  gain  from  interest. 
And  so  on. 

The  Ledger  is  the  book  of  accounts.  The  items  belonging  to  each  account  are  clas- 
sified in  the  ledger,  each  under  its  proper  heading. 

Beginning  with  the  Cash  Account,  on  page  7,  are  given  descriptions  of  ten  of  the 
principal  accounts  usually  found  in  a  ledger. 

CASH  PROBLEMS 

1.  During  January,  1913,  D.  M.  Libby  took  in  $1,247.50  in  cash  and  paid  out  $923.78  cash.  How 
much  cash  did  he  have  left  on  January  31? 

2.  During  February,  1913,  L.  E.  Stone  received  in  cash  the  following  amounts:  $24.65;  $52.73; 
$102.50;  $73.49;  $10.75;  $82.56.  He  paid  out  cash  during  February  as  follows:  $10.50,  $72.69;  $83.47; 
$53.26;  $84.75;  $42.01.     How  much  cash  did  he  have  left  on  February  28? 

3.  J.  H.  Smith's  cash  transactions  during  March,  1913,  were  as  follows:  Mar.  1,  received  $15.26; 
Mar.  2,  paid  out  $5.72;  Mar.  4,  received  $10.00;  Mar.  8.  paid  out  $4.73;  Mar.  10,  received  $5.83;  Mar. 
14,  received  $4.50;  Mar.  17,  received  $8.73;  Mar.  21,  paid  out  $11.54;  Mar.  23,  received  $25.32;  Mar. 
30,  paid  out  $3.75.     How  much  cash  did  he  have  left  on  Mar.  31? 

4.  State  in  writing,  in  your  own  words,  how  you  find  the  amount  of  cash  a  person  has  on  hand  if 
you  know  what  his  receipts  and  payments  of  cash  have  been. 

.  5.  D.  R.  Green  began  business  with  $21.50  in  cash  on  April  1,  1913.     During  the  month  he  took 
in  $276.83  in  cash,  and  paid  out  cash  $157.86.     How  much  cash  did  he  have  on  April  30? 

6.  On  May  1,  1913,  C.  W.  Barnes  began  business  with  $53.47  in  cash.  His  cash  receipts  during 
the  month  were  as  follows:  $5.25,  $16.72,  $32.54,  $31.24,  $35.94,  $13.21,  $14.72,  $17.50.  His  cash  pay- 
ments during  the  month  were:  $4.25,  $47.36,  $3.73,  $14.52,  $21.14.  How  much  did  he  have  on  hand  at 
the  end  of  the  month? 

7.  Ralph  M.  Gray  began  business  on  June  1,  1913,  with  $46.72  in  cash.  He  received  and  paid  out 
during  the  month  in  cash  as  follows:  June  2,  received  $10.25;  June  3,  paid  out  $28.75;  June  7,  received 
$32.00;  June  16,  paid  out  $34.50;  June  22,  received  $24.35;  June  29.  received  $1.23.  How  much  did 
he  have  on  hand  June  30? 

8.  A.  L.  Black  began  business  on  July  1,  1913,  with  $50.00  in  cash.  During  the  month  of  July 
his  cash  receipts  and  payments  were  as  follows:  July  3,  received  $5.67;  July  5,  received  $8.92;  July  8, 
paid  out  $5.00;  July  9,  received  $10.25;  July  12,  paid  out  $5.50;  July  12,  received  $6.25;  July  15,  received 
$7.50;  July  18,  paid  out  $4.25;  July  19,  paid  out  $5.27;  July  20,  received  $22.50;  July  21,  paid  out  $3.85. 
How  much  cash  did  he  have  on  hand  on  July  31? 

9.  State  in  writing  how  you  would  find  the  amount  of  cash  a  person  has  on  hand  if  it  is  known  (a) 
How  much  cash  he  had  at  the  time  of  beginning  business;  (b)  What  his  receipts  of  cash  have  been  since 
then;  (c)  What  his  payments  of  cash  have  been  since  then. 

10.  A.  L.  Black  had  on  hand  Aug.  1,  1913,  the  same  amount  of  cash  as  he  had  on  July  31,  as  deter- 
mined in  problem  8.  During  August  he  received  cash  totaling  $342.63,  and  paid  out  cash  totaling 
$223.47.     How  much  did  he  have  on  hand  on  August  31? 

11.  On  September  1,  1913,  A.  L.  Black  had  on  hand  the  same  amount  of  cash  as  he  had  on  Aug.  31. 
His  receipts  and  payments  of  cash  during  the  month  were  as  follows:  Sept.  2,  received  $10.25;  Sept.  3, 
paid  out  $2.24;  Sept.  6,  received  $17.68;  Sept.  8,  paid  out  $4.50;  Sept.  10,  received  $23.75;  Sept.  15, 
received  $1.72;  Sept.  16,  paid  out  $4.83;  Sept.  18,  paid  out  $4.50;  Sept.  21,  received  $43.25;  Sept.  22, 
paid  out  $2.50;  Sept.  23,  paid  out  $2.50;  Sept.  24,  paid  out  $2.50;  Sept.  25,  paid  out  $2.50;  Sept.  26, 
received  $2.50;  Sept.  27,  paid  out  $2.50.     How  much  cash  did  he  have  on  Sept.  30? 

12.  A.  L.  Black  had  the  same  amount  of  cash  on  Oct.  1,  1913,  as  he  had  on  Sept.  30,  but  during 
October  he  took  in  $252.70  in  cash  from  sales  of  merchandise,  received  $150.00  in  cash  from  persons 


THE   CASH   ACCOUNT  / 

who  owed  him,  found  a  $10.00  gold  piece,  paid  $100.00  in  cash  to  people  whom  he  owed,  paid  $220.25 
for  expenses,  and  through  his  cashier's  mistake  in  making  change  lost  $2.00  cash.  How  much  cash  did 
he  have  on  Oct.  31? 

13.  State  in  writing  how  to  find  the  amount  of  cash  a  person  has  on  hand  if  you  know :  (a)  How  much 
he  had  on  hand  at  the  beginning  of  the  month  (or  other  period);  (b)  How  much  cash  he  has  received 
during  the  month  (or  other  period);  (c)  How  much  cash  he  has  paid  out,  lost  or  otherwise  disposed  of 
during  the  month  (or  other  period). 

,,_- — V  THE  CASH  ACCOUNT 


Purpose:  To  show  the  receipts  and  payments  of  cash. 
Method:  Debit  the  account  when  cash  is  received.     Credit  the  account  when  cash 
is  paid  out. 

Result:  The  difference  between  the  two  sides  is  the  amount  of  cash  on  hand. 


Illustrative  Exercise: 


19— 

Sept. 


1. ^Received  cash  from  H.  M.  Strong,  the  proprietor,  $2,000.00. 

2.  Paid  cash  for  merchandise,  $750.00. 

3.  Paid  rent  for  September  in  cash,  $50.00. 

4. —Received  cash  from  sales  of  merchandise,  $60.00. 

5.  Paid  cash  for  our  note  due  to-day,  $220.00. 

6.  Received  cash-  from  John  Doe  on  account,  $23.50. 

8.  Paid  janitor's  wages  in  cash,  $7.50. 

9.  Received  cash  for  house  and  lot,  $4,000.00. 

10.  Paid  cash  to  Richard  Roe  on  account,  $100.00. 

11.  Received  cash  for  interest  on  a  note,  $10.50. 


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8  ACCOUNTS 

Note  that  the  account  is  divided  into  two  parts,  the  left-hand  side  and  the  right-hand 
side.  By  universal  custom,  these  two  sides  are  called  the  debit  and  credit  sides  (abbrevi- 
ated Dr.  and  Cr.).  The  left-hand  side  is  called  the  debit  side.  The  right-hand  side  is 
called  the  credit  side.  All  receipts  of  cash  are  entered  on  the  debit  side,  and  are  called 
debits;  when  such  entries  are  made,  the  cash  account  is  said  to  be  debited  or  "charged." 
All  payments  of  cash  are  entered  on  the  credit  side,  and  are  called  credits;  when  such 
entries  are  made,  the  cash  account  is  said  to  be  credited. 

Each  side  contains  columns  for  date,  explanation,  folio,  and  amount,  as  shown  in  the 
illustration.  The  explanation  column  and  the  folio  column,  in  the  illustration,  are  left 
blank;  the  purposes  of  these  columns  will  be  explained  later. 

Trace  the  transactions  from  the  Illustrative  Exercise  to  the  Illustration. 

The  heading  "Cash"  is  written  on  the  line  above  the  horizontal  ruling  at  the  top. 
It  is  written  in  a  plain,  bold  hand,  somewhat  larger  than  the  writing  used  in  the  body 
of  the  account. 

It  may  assist  the  student  at  first  to  write  the  abbreviation  "Dr."  above  the  year  date  on  the  left 
hand  side  and  "Cr."  above  the  year  date  on  the  right-hand  side,  writing  in  a  small,  neat  hand.  This  is 
not  a  customary  practice,  however,  and  should  be  discontinued  as  soon  as  the  student  becomes  familiar 
with  the  use  of  the  debit  and  credit  sides. 

Explanation  : 

Sept.  1,  19 — .  Cash  is  received.  The  date  is  entered  in  the  date  column  on  the  debit 
side,  the  year  date  being  placed  just  above  the  horizontal  ruling  at  the  top  of  the  account. 
The  amount  is  written  in  the  money  column.  The  cent  spaces  are  left  blank  when  the 
amount  is  in  even  dollars. 

Sept.  2,  19 — .  The  date  and  amount  of  the  cash  paid  out  are  entered  on  the  credit 
side  in  the  proper  columns.  The  year  date  is  placed  just  above  the  month  and  day,  as 
before. 

Trace  through  the  rest  of  the  transactions. 

How  much  cash  has  been  received? 

How  much  cash  has  been  paid  out? 

How  much  cash  remains  on  hand? 

Is  it  ever  possible  for  the  credit  side  of  the  cash  account  to  be  the  larger?     Why? 

To  Balance  the  Account 

The  account  is  now  to  be  "balanced";  i.e.,  ruled  up  with  a  balance  so  that  the  amount 
of  cash  on  hand  may  be  seen  at  a  glance. 

1st.  Ascertain  the  amount  of  the  balance  by  subtracting  the  smaller  from  the  larger 
side. 

2d.  Write  this  balance  on  the  smaller  side  in  red  ink,  dating  it.  Assume,  for  the  pres- 
ent, that  the  date  of  balancing  is  Sept.  30.  Write  the  explanation  "Balance"  in  the  expla- 
nation column,  and  place  a  check  mark  in  the  folio  column. 

3d.  Rule  a  single  red  line  underneath  the  lowest  item  on  the  account.  This  line  is 
ruled  across  the  money  column  only.  Rule  a  single  red  line  across  the  money  column  of 
the  other  side,  on  the  same  line. 


THE    CASH   ACCOUNT  9 

4th.  Foot  both  money  columns,  writing  the  footings  in  black  ink  on  the  next  line 
below  the  single  red  line. 

5th.  Rule  a  double  red  line  below  the  footings.  This  line  should  extend  across  the 
entire  page,  except  that  it  is  not  ruled  across  the  explanatory  columns. 

6th.  Bring  the  balance  down  in  black  ink  below  the  double  red  ruling,  on  the  side 
opposite  that  on  which  the  red  ink  balancing  entry  is  placed.  Date  this  Oct.  1.  Use 
the  explanation  "Balance"  and  place  a  check  mark  in  the  folio  column. 

Work  out  the  following  exercises  on  the  first  page  of  your  ledger  (Blanks  I,  Book  2). 
Write  the  heading  "Cash"  for  the  first  exercise,  on  the  blue  line  above  the  horizontal  red 
rulings  at  the  top  of  the  page.  Write  the  first  entry  on  the  line  immediately  below  the 
horizontal  red  rulings.  Do  not  forget  the  year  dates.  Write  on  all  lines  on  both  sides, 
leaving  no  blank  lines  except  when  one  side  is  unfilled  at  the  time  of  balancing,  as  shown 
in  the  illustration.  After  completing  Exercise  I,  leave  four  blank  lines  and  write  the 
heading  "Cash"  again.  On  the  next  line  below  the  word  "Cash,"  rule  a  double  red  line 
clear  across  the  page  and  work  Exercise  II. 

EXERCISE  I 
19— 

Jan.     1.  The  proprietor,  W.  H.  Armsby,  invested  cash,  $2,500.00.  ^ 

2.  Paid  cash  for  merchandise,  $200.00. 

3.  Sold  for  ca^h,  merchandise  amounting  to  $45.00. 

4.  Paid  the  clerk's  salary  in  cash,  $10.00. 

6.  Paid  the  rent  in  cash,  $65.00. 

7.  John  Doe  paid  us  cash  on  account,*  $34.50. 

8.  Richard  Roe  redeemed  his  note  in  our  favor  by  paying  us  cash,  $320.60. 

9.  Paid  the  First  Nat'l  Bank  cash  for  interest  on  money  borrowed,  $8.64. 

10.  Sold  a  bill  of  goods  for  $24.30  cash. 

11.  Loaned  John  Doe  cash  on  account,  $5.00. 

12.  Bought  merchandise  for  cash,  $250.00. 

14.     Sold  for  cash,  merchandise  amounting  to  $17.28. 

How  much  cash  was  received? 
How  much  cash  was  paid  out? 
How  much  cash  remains  on  hand? 

Balance  the  account,  dating  the  balancing  entry  Jan.  31.     Do  not  forget  to  "bring  the 
balance  down"  below  the  double  ruled  line. 

EXERCISE  II 

19— 

Feb.  1.     J.  B.  Owen,  the  proprietor,  has  invested  cash,  $1,500.00. 

2.  Paid  cash  for  rent  for  March,  $50.00. 

3.  Paid  cash  for  merchandise  bought,  $565.20. 

*"0n  Account"  means  that  the  cash  was  paid  us  for  something  not  delivered  to  Mr.  Doe  at  the 
time.  Probably  it  was  in  payment  for  something  he  had  bought  at  some  previous  time,  which  he 
had  had  charged  to  his  account.     The  payment  was  made  "on  account." 


10 


ACCOUNTS 


19— 


Feb.  5.     Received  cash  from  John  Doe  on  account,  $44.60. 

6.     Paid  cash  for  sundry  petty  expenses,  $1.67. 

Sundry  means  various.     Petty  means  small.     "Sundry  petty  expenses,"  therefore,  means  various 
small  expenses. 

How  much  cash  was  received? 

How  much  cash  was  paid  out? 

How  much  remains  on  hand? 

Balance  the  account,  dating  the  balancing  entry  Feb.  28.     Bring  the  balance  down. 

PROMISSORY  NOTES 

A  Promissory  Note,  usually  called  a  note,  is  a  written  promise  to  pay  a  certain  sum  of 
money  at  a  specified  time  or  on  demand,  to  a  certain  person. 


Form  of  Note 


(In  the  above  note,  Geo.  R. 
(In  the  above  note, 


The  parties  to  a  note  are  the  maker  and  the  payee. 

The  maker  is  the  person  who  signs  it,  promising  to  pay. 
Davis.) 

The  payee  is  the  person  to  whom  the  note  is  made  payable. 
Samuel  Stewart.) 

Notes  may  be  transferred  by  the  payee  to  another  holder.  This  transfer  is  evidenced 
by  the  endorsement  of  the  payee.  This  consists  of  his  signature  written  across  the  back  of 
the  paper,  with  or  without  words  indicating  to  whom  the  paper  is  sold.  The  person  selling 
the  paper  is  the  endorser.     The  person  to  whom  it  is  sold  is  the  endorsee. 


NOTES  RECEIVABLE  PROBLEMS 

1.  During  March,  1913,  I  received  the  promissory  notes  of  others  in  the  following  amounts:  $128.75, 
$236.50,  $58.75,  $72.83,  $84.92,  $150.00.  The  following  were  paid  off  during  the  month  and  I  gave  them 
back  to  the  signers:  $236.50,  $72.83,  $150.00,  and  $84.92.  What  was  the  total  of  other  persons'  notes 
in  my  hands  on  March  31,  if  there  were  no  other  notes  received  or  disposed  of  by  me  during  the  month? 

2.  On  Feb.  1,  1913,  I  received  J.  C.  Clark's  note  for  $150.00.  On  Feb.  3, 1  received  O.  F.  Winter's 
note  for  $125.00.     On  Feb.  7,  I  received  T.  H.  Jasper's  note  for  $78.50.     On  Feb.  11,  J.  C.  Clark  paid 


THE  NOTES  RECEIVABLE  ACCOUNT  11 

his  note  for  $150.00  and  I  gave  it  back  to  him.  On  Feb.  22,  T.  H.  Jasper  p^id  his  note  for  $125.00  and 
I  gave  it  back  to  him.  No  other  notes  having  been  received  or  disposed  of  by  me  during  the  month, 
what  was  the  total  of  notes  held  by  me  against  others  on  Feb.  28? 

3.  State  in  writing  how  to  find  the  amount  of  notes  on  hand  if  it  be  known:  (a)  What  notes  are 
received  and  the  amount  of  each;  (b)  What  notes  are  paid  by  the  signers  and  given  back  to  them? 

4.  On  April  1,  1913,  H.  T.  Adams  had  on  hand  promissory  notes  signed  by  others  in  his  favor  as 
follows:  M.  R.  Jackson's  note  for  $100.00;  H.  K.  Johnson's  note  for  $50.00;  Jno.  R.  Robertson's  note 
for  $32.50;  and  C.  E.  Holmgren's  note  for  $90.00.  During  April  the  following  notes  were  paid  off  and 
he  gave  them  back  to  the  signers:  H.  K.  Johnson's  note  for  $50.00;  and  M.  R.  Jackson's  note  for  $100.00. 
What  was  the  total  of  promissory  notes  held  by  him  on  April  30? 

5.  On  May  1,  1913,  I  had  on  hand  promissory  notes  amounting  to  $375.00.  During  May,  I  received 
notes  signed  by  other  persons  as  follows:  $45.00,  $120.50,  and  $37.75;  and  the  following  notes,  being 
paid  as  they  became  due,  were  handed  back  by  me  to  the  signers:  $120.50,  $52.00,  $70.50.  What  was 
the  total  amount  of  the  notes  I  had  on  hand  on  May  31? 

6.  On  June  1,  1913,  you  had  on  hand  Henry  W.  George's  note  in  your  favor  for  $100.00.  On  June 
2,  you  received  a  note  from  E.  B.  Alden  in  your  favor  for  $125.00.  You  also  received  a  note  from  I.  N. 
Johns  for  $75.00,  on  June  10.  Henry  W.  George's  note  fell  due  on  June  13;  he  paid  the  amount  he  owed 
and  you  gave  him  back  his  note.  E.  B.  Alden  paid  his  note  on  April  17,  and  you  gave  it  back  to  him. 
On  June  20,  I.  N.  Johns  paid  $25.00  on  his  note.  At  the  end  of  the  month  how  much  was  due  you  on 
other  person's  notes,  no  other  notes  having  been  received  or  disposed  of? 

7.  On  July  1,  1913,  I  had  on  hand  other  persons'  notes  amounting  to  $650.50.  During  the  month 
I  received  notes  amounting  to  $450.25,  notes  were  redeemed  by  the  signers  and  given  back  to  them 
amounting  to  $125.00,  and  notes  amounting  to  $175.60  were  disposed  of  to  my  banker  for  cash. 
What  was  the  total  of  notes  held  by  me  on  July  31? 

8.  Other  persons'  notes  held  by  you  on  Aug.  1,  1913,  amounted  to  $127.65.  On  Aug.  3,  you  received 
A's  note  for  $75.00.  On  Aug.  5,  you  received  B's  note  for  $50.00.  C's  note  in  your  favor  for  $40.00 
was  received  by  you  on  the  10th  of  the  month.  On  Aug.  15,  A  paid  his  note  of  Aug.  3,  and  you  gave  it 
back  to  him.  On  Aug.  20,  you  received  D's  note  for  $67.50.  On  Aug.  20,  C  paid  you  $40.00  and  you 
gave  him  back  his  note.  No  other  transactions  involving  notes  took  place  during  August.  What  was 
the  total  of  other  persons'  notes  held  by  you  on  Aug.  31? 

9.  On  Sept.  1,  1913,  the  notes  held  by  you  were  the  same  as  on  Aug.  31.  During  the  month  you 
received  notes  amounting  to  $250.75,  and  disposed  of  notes  amounting  to  $132.50.  What  was  the  total 
of  notes  in  your  hands  on  Sept.  30? 

10.  The  notes  held  by  you  on  Oct.  1,  1913,  were  the  same  as  on  Sept.  30.  Transactions  involving 
notes  were  as  follows  during  October:  Oct.  1,  you  received  E's  note,  $100.00.  Oct.  2,  D  paid  his  note, 
$67.50.  Oct.  5,  you  received  F's  note,  $27.50.  Oct.  9,  you  bought  G's  note  from  F,  $42.25.  Oct.  12, 
you  sold  E's  note  for  $100.00  to  G.     What  was  the  amount  of  other  persons'  notes  on  hand  on  Oct.  31? 

11.  State  in  writing  how  to  find  the  amount  of  notes  on  hand  at  the  end  of  a  given  period  if  there 
be  known:  (a)  The  notes  on  hand  at  the  beginning  of  the  period  and  the  amount  of  each;  (b)  The  notes 
received  during  the  period  and  the  amount  of  each;  (c)  The  notes  disposed  of  during  the  period  and  the 
amount  of  each, 

THE  NOTES  RECEIVABLE  ACCOUNT 

Purpose:  To  contain  a  record  of  all  notes  the  amounts  named  in  which  are  to  be 
received  by  us.  This  includes  notes  which  we  hold  as  original  payee  and  notes  endorsed 
over  to  us  by  the  original  payee. 

Method:  Debit  the  Notes  Receivable  account  when  a  note  signed  by  another  is 
received.     Credit  the  account  when  such  paper  is  disposed  of.     • 

Result:  The  difference  between  the  two  sides  will  show  at  any  time  the  amount  of 
notes  receivable  on  hand. 

Which  side  of  this  account  will  be  larger,  if  the  two  sides  are  not  the  same? 


12 


ACCOUNTS 


The  following  illustration  shows  an  account  begun  below  the  top  of  the  page. 
Illustrative  Exercise. 

19— 

Sept.  1.     The  proprietor  has  invested  a  note  which  he  holds  against  A.  R.  Scott. 
Face  of  note,  $105.60. 

2.  Sold  to  W.  G.  Humphrey  a  bill  of  goods  worth  $34.60,  and  received  his 

note  in  payment. 

3.  Loaned  W.  J.  Burnham  $50.00  in  cash,  taking  his  60-day  note  in  return. 

5.  Sold  the  note  which  we  hold  against  W.  G.  Humphrey  to  J.  A.  Lippincott 

for  cash,  $34.60. 

6.  Received  H.  M.  Owen's  note  for  $65.00  on  account. 

7.  A.  R.  Scott  has  paid  his  note  in  cash,  $105.60. 

8.  Paid  Jones  &  Co.'s  account  against  us  for  $50.00  by  endorsing  to  them 

W.  J.  Burnham's  note. 


*f' 


Illustration 


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J2U/iJ: 


a^ 


/9.a^ 


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/  OJ  6o  5^^ 


7 

\J0 


A.I1S.2J1. 


^jr 


Aj  a.^C^t'O't.^c^-^ 


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S^^f^i^ 


Explanation:  In  working  the  above  exercise  it  was  only  necessary  to  apply  the 
method — debit  the  account  when  a  note  is  received;  credit  the  account  when  a  note  is 
disposed  of.     The  account  is  balanced  the  same  as  the  cash  account. 

Trace  each  transaction  from  the  Illustrative  Exercise  to  the  Illustration. 


19— 

Mar.  1. 
2. 
3. 


EXERCISE  III 

Received  on  account  C.  W.  Penney's  60-day  note  for  $126.50. 

Holmes  &  Stoddard  have  signed  a  note  in  our  favor  for  $250.00  on  account. 

C.  W.  Penney  made  a  payment  of  $26.50  on  his  note  of  Mar.  1.  (Credit 
Notes  Receivable,  as  you  would  if  he  had  paid  the  note  in  full  and  it  had 
been  canceled  and  returned  to  him.     The  amount  credited  is  $26.50.) 

Received  the  Chicago  Grocery's  note  for  $247.50  for  Mdse.  sold  them  to-day. 

Holmes  &  Stoddard  have  paid  cash  for  their  note  of  Mar.  2,  $250.00. 


THE  NOTES  RECEIVABLE  ACCOUNT  13 

19— 

Mar.  7.     Received  H.  W.  Capron's  note  for  $46.57  in  full  of  account.     (This  means 
that  the  note  was  for  the  entire  amount  he  owed  us.) 

8.  H.  E.  Casteel  has  given  us  a  note  for  $59.54  payable  in  ten  days,  in  return 

for  money  loaned  him. 

9.  Disposed  of  the  note  against  H.  W.  Capron,  selling  it  to  the  First  National 

Bank  for  cash,  $46.57. 

What  was  the  total  of  notes  receivable  received? 

Wfiat  was  the  total  of  notes  receivable  disposed  of? 

What  is  the  amount  of  notes  receivable  still  on  hand? 

Balance  the  account,  dating  the  entry  Mar.  31.  The  balancing  entry  is  written  on  the 
first  blank  line  on  the  credit  side.  There  will  be  one  blank  line  on  the  credit  side  when  the 
account  is  balanced.     Bring  the  balance  down. 

EXERCISE  IV 

Open  a  Notes  Receivable  account  with  the  balance  on  hand  shown  by  Exercise  III. 
This  is  done  by  making  the  following  entry  on  the  debit  side:  "April  1,  19 — ,  Balance, 
***•**"     Enter  the  following  items: 

19— 

April     1.     Bought  from  Green  &  Co.  for  $650.00  in  cash  a  note  signed  by  the  Illinois 
Construction  Co. 

2.  Received  of  Lloyde  Adams  on  account  his  note  for  $250.00. 

3.  M.  J.  Mattison  has  mailed  us  his  note  for  $285.64  to  apply  on  account. 

4.  Received  from  John  Morrison,  on  account,  a  note  signed  by  Oscar  Wilson, 

for  $275.80. 

6.  Paid  the  Laclede  Gas  Co.  in  full  of  account,  by  giving  them  the  note  signed 

by  Lloyde  Adams,  $250.00. 

7.  Felix  McAvoy  paid  his  account  by  giving  us  his  note  for  the  amount  in  full, 

$225.75. 

8.  Sold  Felix  McAvoy's  note  to  the  Harris  Trust  &  Savings  Bank  for  its  face 

value  in  cash. 

9.  Received  Frank  Elliott's  30-day  note  for  $240.55  for  Union  Bank  stock 

sold  him  to-day. 

10.  Endorsed  Oscar  Wilson's  note  for  $275.80  to  Jacob  Williamson  on  account. 

What  was  the  total  of  notes  receivable  received,  including  the  balance  on  hand  April 
1?  Disposed  of?  What  is  the  amount  remaining  on  hand?  Which  side  of  this  account 
should  always  be  the  larger,  if  the  sides  are  not  equal? 

Balance  the  account,  dating  the  entry  the  last  day  of  the  month.  Bring  the  balance 
down,  dating  it  the  first  of  the  next  month. 

Compare  the  two  sides  and  make  a  list  of  the  notes  on  hand.  See  that  the  total  of 
this  list,  plus  the  balance  on  hand  April  1,  equals  the  difference  between  the  two  sides. 


14  ACCOUNTS 


NOTES  PAYABLE  PROBLEMS 


1.  During  February,  1913,  you  issued  notes  totaling  $473.50,  and  of  these  you  redeemed  during  the 
month  notes  totaling  $232.25-.     How  much  did  you  still  owe  on  notes  outstanding  Feb.  28? 

2.  During  March,  1913, 1  issued  notes  in  favor  of  others  as  follows:  Mar.  1,  my  note  in  favor  of  Chas. 
E.  French,  $45.75;  Mar.  2,  my  note  in  favor  of  the  First  National  Bank,  $250.00;  Mar.  5,  my  note  in 
favor  of  E.  N.  Banks,  $100.00;  and  on  Mar.  15,  my  note  in  favor  of  Gill  &  Co.  for  $82.57.  On  Mar. 
21,  I  paid  my  note  in  favor  of  Chas.  E.  French,  $45.75.  On  Mar.  25,  I  paid  my  note  in  favor  of  E.  N. 
Banks,  $100.00.     How  much  did  I  still  owe  others  on  notes  outstanding  Mar.  31? 

3.  During  April,  1913,  you  issued  notes  in  the  following  amounts:  $100.50,  $67.25,  $75.20,  $52.34, 
$87.50,  $93.46,  $45.60;  and  you  redeemed  notes  as  follows:  $52.34,  $45.60,  $93.46,  $87.50,  $100.50, 
$67.25,  $75.20.     How  much  did  you  owe  on  notes  outstanding  against  you  on  April  30? 

4.  State  in  writing  how  to  determine  the  amount  of  notes  outstanding  against  a  person  if  the  fol- 
lowing facts  be  known:  (a)  What  notes  have  been  issued,  and  the  amount  of  each;  (b)  What  notes  have 
been  redeemed  and  the  amount  of  each. 

5.  Notes  outstanding  against  you  on  May  1  amounted  to  $750.26.  During  the  month  you  issued 
new  notes  amounting  to  $523.45  and  paid  off  old  notes  amounting  to  $620.34.  How  much  did  you  owe 
on  notes  outstanding  May  31? 

6.  Notes  outstanding  against  D.  B.  Williams  on  July  1,  1913,  amounted  to  $420.20.  On  July  5, 
he  issued  his  note  in  favor  of  L.  H.  Hawkinson  for  $225.25.  On  July  7,  he  redeemed  a  note  held  against 
him  by  the  First  National  Bank,  $250.75.  On  July  10,  he  issued  a  note  in  favor  of  M.  B.  Conway,  $21.76. 
On  July  15,  he  gave  M.  M.  Goodkind  his  note  for  $75.00.  On  July  25,  he  redeemed  his  note  in  favor  of 
L.  H.  Hawkinson,  $225.25.  On  July  27,  he  redeemed  a  note  held  against  him  by  H.  E.  BuUerman, 
$42.75.  What  was  the  total  of  notes  outstanding  against  Williams  on  July  31,  no  other  notes  having 
been  issued  or  redeemed  by  him? 

7.  Notes  outstanding  against  D.  B.  Williams  on  Aug.  1,  1913,  were  the  same  as  on  July  31,  as  deter- 
mined in  the  preceding  problem.  On  Aug.  2,  he  issued  his  note  in  favor  of  Geo.  N.  Harmon,  $150.67. 
On  Aug.  5,  he  issued  a  note  in  favor  of  Fairbanks  and  Co.,  $42.07.  On  Aug.  10,  he  gave  S.  B.  Morse  a 
note  for  $45.76.  On  Aug.  15,  he  redeemed  his  note  in  favor  of  Fairbanks  and  Co.  by  paying  them 
$42.07.  During  the  rest  of  the  month  the  new  notes  issued  by  him  were  as  follows:  $50.00,  $62.50, 
$123.48.     No  other  notes  having  been  redeemed  by  him,  what  did  he  owe  on  notes  outstanding  Aug.  31? 

8.  State  in  writing  how  to  find  the  amount  of  notes  outstanding  at  the  end  of  a  given  period  if  the 
following  facts  be  known:  (a)  What  notes  were  outstanding  at  the  beginning  of  the  period  and  the 
amount  of  each;  (b)  What  notes  have  been  issued  during  the  period  and  the  amount  of  each;  (c) 
What  notes  have  been  redeemed  during  the  period  and  the  amount  of  each. 


THE  NOTES  PAYABLE  ACCOUNT 

Purpose:  To  contain  a  record  of  all  notes  the  amounts  of  which  are  to  be  paid  by  us. 
This  includes  notes  signed  by  us,  whether  held  by  the  person  named  in  them  or  not. 

Method  :  Credit  the  Notes  Payable  account  when  we  issue  a  note.  Debit  the  account 
when  we  redeem  the  note  (and  receive  it  back,  canceled). 

Result:  The  difference  between  the  two  sides  will  show  at  any  time  the  amount  of 
such  paper  outstanding  against  us. 

If  the  two  sides  of  this  account  are  not  equal,  which  side  will  be  the  larger? 

Illustrative  Exercise: 

19— 

Sept.  1.     Issued  a  note  in  favor  of  Jas.  Hammond  for  $75.00  in  payment  for  a  bill 
of  merchandise. 

2.  Bought  of  Wilton  &  Hoyne  goods  worth  $120.60,  and  gave  them  our  60-day 

note  in  payment. 

3.  Gave  Longworth  &  Co.  our  note  for  $250.00  on  account. 


THE  NOTES  PAYABLE  ACCOUNT 


15 


19— 

Sept.  6. 

7. 


Redeemed  our  note  favor  of  James  Hammond  in  cash,  $75.00. 

Made  a  part  payment  on  our  note  in  favofof  Longworth  &  Co.,  $100.00. 

Received  of  S.  R.  George  on  account,  our  note  in  favor  of  Wilton  &  Hoyne 
for  $120.60.  (Wilton  &  Hoyne  had  evidently  endorsed  our  note  over 
to  S.  R.  George.  As  Mr.  George  was  in  debt  to  us,  he  made  us  a  part 
payment  by  returning  our  own  note.) 

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What  was  the  total  of  notes  payable  issued? 
What  was  the  total  of  notes  payable  redeemed? 
What  is  the  balance  on  notes  payable  outstanding? 


19— 

May 


EXERCISE  V 


Issued  our  note  for  $456.78  to  C.  D.  Johns  &  Co.  on  account. 
Bought  merchandise  of  H.  O.  Wright  on  our  note  at  15  days,  $75.64. 
Remitted  C.  D.  Johns  &  Co.  $156.78  cash  in  part  payment  of  our  note  in 
their  favor. 

Bought  on  our  note  a  bill  of  goods  amounting  to  $125.60. 

Redeemed  our  note  in  favor  in  favor  of  H.  O.Wright  in  cash,  $75.64. 

Redeemed  our  note  of  May  1  by  giving  CD.  Johns  &  Co.  a  new  note  for 
the  amount  still  due  on  it,  $300.00.     (Two  entries.) 

Bought  Mdse.  amounting  to  $345.64  from  the  Ludlow  Mercantile  Co.,  and 
signed  a  60-day  note  in  their  favor  to  cover  the  amount  of  the  bill. 

Paid  cash  for  our  note  of  May  4,  $125.60. 

Bought  on  our  note  a  bill  of  goods  amounting  to  $245.60. 
What  was  the  total  of  notes  payable  issued? 
W^hat  was  the  total  redeemed? 
What  amount  is  still  due  on  notes  payable? 


4. 
17. 
23. 

24. 

25. 
26. 


16  ACCOUNTS 

Balance  the  account  and  bring  the  balance  down  dated  June  1.  Continue  the  entries 
for  June  on  the  same  account  below  the  rulings. 

EXERCISE  VI 
19— 

June     1.     Gave  H.  W.  Austin  on  account  our  note  for  $376.89. 

2.  Issued  our  30-day  note  for  $250.65  in  favor  of  Geo.  S.  Kamp  in  full  of 

account. 

3.  We  owed  H.  F.  Crane  $120.00  and  settled  our  account  by  giving  him  a  10- 

day  note. 

4.  Paid  the  note  in  favor  of  H.  W.  Austin  in  cash,  $376.89. 

5.  Borrowed  of  the  Continental  Bank  $250.00  and  gave  them  our  30-day  note 

for  the  amount. 

12.  Paid  our  note  for  $250.65  in  favor  of  Geo.  S.  Kamp  in  cash. 

13.  Bdlight  Mdse.  of  Hoffman  Bros,  on  our  15-day  note,  $123.45. 

13.     Paid  T.  E.  Holmes  $120.00  in  cash  and  received  in  return  our  canceled  note. 
15.     Bought  of  E.  N.  Herbstreet,  on  our  note  at  30  days,  an  invoice  of  Mdse. 

amounting  to  $253.85. 
28.     Remitted  Hoffman  Bros,  our  check  for  $123.45  inpayment  of  our  note  of 

the  13th  inst. 
30.     Bought  at  the  Post  Office  for  cash  a  money  order  for  $253.85  and  sent  it  to 

E.  N.  Herbstreet  in  payment  of  our  note  in  his  favor. 

What  was  the  total  of  the  notes  payable  issued,  including  the  balance  outstanding 
June  1? 

What  was  the  total  of  notes  payable  redeemed? 

What  is  the  total  of  notes  payable  still  outstanding? 

Compare  the  two  sides  of  the  account,  placing  a  check  mark  opposite  the  amounts  of 
all  notes  issued  during  May  and  June  that  have  since  been  redeemed.  What  are  the  dates 
and  the  amounts  of  the  notes  still  unpaid?  Does  their  total  agree  with  the  balance  of 
the  account? 

PERSONAL  ACCOUNT  PROBLEMS 

1.  During  January,  1913,  we  sold  to  E.  R.  Sabin  goods  for  which  he  did  not  pay  at  time  of  purchase 
amounting  to  $423.64  and  during  the  same  month'his  payments  to  us  amounted  to  $273.27.  How  much 
did  he  owe  us  on  Jan.  31? 

2.  H.  M.  Baldwin  bought  from  us  during  February,  1913,  the  following  bills  of  goods  for  which  he 
made  no  payment  at  the  time  of  purchase:  $23.41,  $52.76,  $31.64,  $12.83,  $22.42,  $34.58,  $27.64,  $32.29. 
During  the  month  he  made  payments  as  follows:  $12.50,  $15.00,  $10.25,  $23.41,  $12.83.  How  much 
did  he  owe  us  on  Feb.  28? 

3.  During  March,  1913,  H.  R.  McLain  bought  from  us  merchandise  for  which  he  did  not  make 
payment  at  the  time,  and  made  us  payments,  as  follows:  Mar.  1,  he  bought  merchandise,  $52.65;  Mar. 
3,  he  bought  merchandise,  $23.17;  Mar.  6,  he  bought  merchandise,  $42.75;  Mar.  8,  he  paid  $23.17; 
Mar.  12,  he  bought,  $25.19;  Mar.  15,  he  paid  $30.00;  Mar.  18,  he  paid  $22.65;  Mar.  21, he  bought,  $37.92; 
Mar.  22,  he  bought,  $10.50;  Mar.  22,  he  paid  $25.19;  Mar.  23,  he  bought,  $12.75;  Mar.25,  he  paid  $37.92; 
Mar.  28,  he  bought,  $26.05.     How  much  did  he  owe  us  on  Mar.  31? 

4.  State  in  writing  how  to  find  the  amount  due  from  a  customer  if  you  know  what  his  purchases 
have  been  and  what  his  payments  have  been. 

5.  On  March  1,  1913,  H.  K.  James  owed  us  $27.50.  During  the  month  our  sales  to  him  for  which 
he  did  not  make  payment  at  the  time  were:  $4.34,  $5.28,  $10.26,  $8.92,  $12.20,  $8.96,  $12.58,  $7.26. 
His  payments  during  the  mouth  were:  $5.00,  $20.00,  $10.00.  How  much  did  he  owe  us  on  Mar.  317 


PERSONAL    ACCOUNTS  17 

6.  On  April  1,  1913,  H.  K.  James  owed  us  the  amount  determined  in  the  last  problem  as  due  on 
Mar.  31.  Sales  to  him  during  the  month,  for  which  he  made  no  payment  at  the  time,  and  payments 
made  at  various  times  during  the  month  by  him,  were  as  follows:  April  2,  sale,  $12.20;  April  5,  sale, 
$4.32;  April  6,  payment,  $5.00;  April  10,  sale,  $8.75;  April  12,  sale,  $2.36;  April  15,  payment,  $8.50; 
April  18,  sale,  $5.20;  April  20,  sale,  $6.50;  April  21,  payment,  $10.00;  April  23,  sale,  $12.70;  April  24, 
payment,  $7.50.     How  much  did  he  owe  us  on  April  30? 

7.  On  May  1,  1913,  H.  K.  James  owed  us  the  amount  determined  in  the  last  problem  as  due  on 
April  30.  During  the  month  our  sales  to  him  were  $24.36,  $17.19,  $15.42  and  $6.30  and  his  payments 
to  us  were  $10.50,  $15.25,  $23.38,  $1.42,  and  $4.29.   How  much  did  he  owe  us  on  May  31? 

8.  State  in  writing  how  to  find  the  balance  due  from  a  customer  at  the  end  of  a  certain  period  if 
the  following  facts  be  known:  (a)  How  much  he  owed  us  at  the  beginning  of  the  period;  (b)  What  sales 
have  been  made  to  him  during  the  period;  (c)  What  payments  have  been  made  hyhim  during  the  period . 

9.  My  purchases  from  Jno.  H.  Beeler  during  July,  1913,  for  which  I  did  net  make  payment  at  the 
time,  amounted  to  $256.72;  but  during  the  month  I  made  three  payments  of  $75.00  each.  How  much 
did  I  owe  him  on  July  31? 

10.  State  in  writing  how  to  find  the  amount  due  to  one  from  whom  we  buy,  if  the  total  amount 
purchased  from  the  person  and  the  total  amount  paid  to  the  person  be  known. 

11.  On  Aug.  1,  1913,  I  owed  R.  L.  Stevenson  $29.50.  My  purchases  from  him  during  the  month 
for  which  I  did  not  make  payment  at  the  time  were:  $25.40,  $32.24,  $24.36,  $10.75,  $21.72,  $29.80. 
My  payments  during  the  month  were:  $32.24,  $10.75,  $24.36,  $25.40,  and  $29.80.  How  much  did 
I  owe  him  on  Aug.  31? 

12.  On  Sept.  1,  1913,  I  owed  to  R.  L.  Stevenson  the  amount  determined  in  the  last  problem  as  due 
him  on  Aug.  31.  My  purchases  from  him  for  which  I  did  not  make  payment  at  the  time  of  purchase, 
and  my  payments  to  him,  during  the  month  of  September,  were  as  follows:  Sept.  2,  purchase,  $40.50; 
Sept.  4,  purchase,  $29.65;  Sept.  7,  payment,  $32.46;  Sept.  8,  purchase,  $27.50;  Sept.  12,  payment,  $40.50; 
Sept.  14,  payment,  $29.65;  Sept.  17,  purchase,  $43.84;  Sept.  18,  payment,  $27.50.  How  much  did 
I  owe  him  on  Sept.  30? 

13.  On  Oct.  1,  1913,  I  owed  to  R.  L.  Stevenson  the  amount  determined  in  the  last  problem  as  due 
on  Sept.  30.  During  the  month  my  purchases  from  him  amounted  to  $185.73,  and  my  payments  to 
him  amounted  to  $152.75.  He  allowed  claims  made  by  me  for  shortages  and  damaged  goods  amount- 
ing to  $6.75.     How  much  did  I  owe  him  on  Oct.  31? 

14.  State  in  writing  how  to  find  the  amount  due  a  person  from  whom  we  buy  if  the  following  facts 
be  known:  (a)  The  amount  due  him  at  some  previous  date;  (b)  The  amounts  purchased  since  that  date; 
(c)  The  payments  made  to  him  and  allowances  made  by  him  since  that  date. 

PERSONAL  ACCOUNTS 

Purpose:  To  contain  a  record  of  all  transactions  with  persons,  firms,  and  corpora- 
tions not  settled  at  the  time  of  their  occurrence. 

Method:  Debit  persons  when  they  cost  us  something;  credit  persons  when  they 
return  us  something. 

Result:  The  difference  between  the  two  sides  will  be  the  amount  due  us  or  due  the 
person.  If  the  debit  side  be  the  larger,  the  person  has  cost  us  more  than  he  has  returned 
us,  and  he  owes  us.  If  the  credit  side  be  the  larger,  the  person  has  returned  or  produced 
to  us  more  than  he  has  cost  us,  and  we  owe  him. 

Illustrative  Exercise: 

19— 

Sept.  1.     Sold  W.  B.  Dewey,  Galesburg,  111.,  on  account,  Mdse.  amounting  to  $50.65. 

2.  W.  B.  Dewey  gave  us  his  note  on  account  for  $25.00. 

3.  W.  B.  Dewey  returned  Mdse.  to  the  amount  of  $5.15  as  not  being  what  he 

had  ordered. 


18 


ACCOUNTS 


19— 

Sept.  4.     Sold  W.  B.  Dewey  on  account,  Mdse.  amounting  to  $10.25. 

5.  Collected  from  W.  B.  Dewey  cash,  $20.00. 

6.  Allowed  W.  B.  Dewey  $1.05  for  one  sack  of  flour  which  was  spoiled. 

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Note  :  Leave  personal  accounts  open  except  when  they  are  paid  or  settled  in  full,  at  which  time 
they  are  to  be  ruled  and  footed.  The  debit  and  credit  columns  are  footed  and  each  footing  is  placed  close 
beneath  the  last  item  in  the  column  to  which  it  applies,  as  shown  in  the  illustration,  in  small  lead  pencil 
figures. 

Explanation:  W.  B.  Dewey  "cost"  us  the  merchandise  which  we  delivered  to  him  on 
account  on  Sept.  1  and  Sept.  4.  The  "returns"  on  W.  B.  Dewey's  account  consisted  of: 
Sept.  2,  a  note;  Sept.  3,  goods  returned;  Sept.  5,  cash;  and  on  Sept.  6,  a  claim  for  dam- 
aged goods. 

What  is  the  total  W.  B.  Dewey  has  cost  us? 

How  much  has  he  returned  or  produced  to  us? 

Does  he  owe  us  or  do  we  owe  him,  and  how  much? 

The  foregoing  is  called  an  account  receivable,  because  the  amount  of  its  balance  is  to 
be  received  by  us.  When  the  balance  is  to  be  paid  by  us,  the  amount  is  an  account  pay- 
able. The  balance  is  not  shown  by  a  red  ink  entry,  as  in  other  accounts,  but  by  a  small 
lead  pencil  figure  at  the  left  of  the  footing  on  the  larger  side. 


19— 

July 


EXERCISE  VII 


Bought  of  S.  Y.  Gillan  &  Co.,  an  invoice  of  Mdse.  amounting  to  $240.60. 
Gave  them  our  note  on  account,  $100.00. 
Returned  to  them  Mdse.  as  damaged,  $10.00. 
Bought  of  them  a  bill  of  goods  amounting  to  $129.50. 
We  claimed  a  shortage  on  yesterday's  order  of  goods  amounting  to  $9.50, 
and  they  allowed  the  claim. 
8.     Paid  them  cash  on  account,  $37.50. 

Explanation:  S.  Y.  Gillan  &  Co.  have  "produced"  to  us  the  things  we  have  bought 
of  them.  They  have  cost  us  the  cash,  notes,  and  Mdse.  we  have  delivered  to  them. 
Treat  the  claim  allowed  on  July  7  as  though  the  goods  had  come  and  had  been  returned 
by  us. 


THE  REAL  ESTATE  ACCOUNT  19 

How  much  have  we  bought  of  them? 
What  is  the  total  with  which  we  have  debited  them? 
Do  we  owe  them  or  do  they  owe  us,  and  how  much? 
Continue  Exercise  VIII  on  the  same  account. 

EXERCISE  VIII 
19— 

Aug.  1.  Bought  of  S.  Y.  Gillan  &  Co.  Mdse.  amounting  to  $145.60. 

2.  Paid  them  cash,  $50.00.  ^ 

3.  Gave  them  our  note  for  $50.00. 

4.  Bought  of  them  an  invoice  of  goods  worth  $135.00. 

5.  Endorsed  over  to  them  a  note  which  we  held  against  C.  O.  Boston,  $110.50. 

6.  Returned  to  them  damaged  goods,  $12.25. 

What  is  the  total  of  the  credit  side,  including  the  lead  pencil  footing  for  July? 
What  is  the  total  with  which  we  have  debited  them,  including  the  July  footing? 
Do  we  owe  them  or  do  they  owe  us,  and  how  much? 

REAL  ESTATE  PROBLEMS 

1.  Swift  bought  five  houses  and  lots  paying  the  following  prices:  $4275.00,  $4390.00,  $5200.00, 
$6250.50,  $5460.75.  He  sold  them  for  $5000.00,  $5150.60,  $5750.00,  $7500.00,  and  $6000.00  respec- 
tively.    Did  he  gain  or  lose  on  real  estate,  and  how  much? 

2.  State  in  writing  how  to  find  the  amount  of  gain  or  loss  on  real  estate  when  all  is  sold  if  it  be 
known  what  was  paid  for  and  what  was  realized  on  each  piece  of  property. 

3.  D.  G.  Perrin  bought  two  25-foot  lots  on  Union  Ave.  at  $75.00  a  front  foot.  He  built  on  these  lots 
two  2-flat  buildings  which  cost  him  $3450.00  each.  He  then  sold  one  building  and  lot  for  $6500.00. 
How  much  did  he  gain,  the  unsold  building  and  lot  being  valued  at  what  they  cost  him? 

4.  State  in  writing  how  to  find  the  gain  or  loss  on  real  estate  if  it  be  known:  (a)  What  the  real 
estate  cost;  (b)  What  was  realized  on  the  real  estate  sold;  (c)  The  value  of  the  real  estate  remaining  on 
hand  unsold. 

6.  On  Jan.  1,  1913,  W.  F.  Dean  owned  real  estate  valued  at  $12540.50.  On  Jan.  10  he  bought  a 
house  and  lot  for  $5250.00.  On  Jan.  15  he  sold  a  house  and  lot  for  $6500.00.  He  made  no  other  sales 
or  purchases  during  January.  On  Jan.  31  he  valued  his  real  estate  at  $13500.00.  Did  he  gain  or  lose 
on  real  estate,  and  how  much? 

6.  D.  G.  Perrin  had  on  hand  on  May  1,  1913,  one  building  and  lot  on  Union  Ave.  which  he  valued 
at  $5325.00.  During  May  he  acquired  other  properties  at  the  following  prices:  $5500.00,  $4925.00, 
$4650.50,  $2950.50,  $3875.63,  and  disposed  of  four  houses  and  lots  at  $6000.00,  $6500.00.  $4850.00, 
and  $3000.00,  respectively.  He  valued  his  real  estate  on  May  31  at  $11225.75.  What  was  the  amount 
of  his  profit  or  loss  on  real  estate  during  May? 

7.  State  in  writing  how  to  find  the  gain  or  loss  on  real  estate  for  a  certain  period  if  the  following 
be  known:  (a)  The  value  of  real  estate  on  hand  at  the  beginning  of  the  period;  (b)  The  amounts  paid 
for  real  estate  purchased  during  the  period;  (c)  The  amounts  received  from  sales  of  real  estate  during 
the  period;  (d)  The  value  of  real  estate  remaining  on  hand  at  the  end  of  the  period. 

THE  REAL  ESTATE  ACCOUNT 

Purpose  :  To  contain  a  record  of  the  separate  purchases  and  sales  of  houses  and  lands. 
Method  :  Debit  the  account  for  costs  of  real  estate.     Credit  it  for  returns  from  sales 
of  real  estate.     (Costs  for  repairs,  maintenance,  etc.,  are  not  costs  of  real  estate.) 


20 


ACCOUNTS 


Result:  The  difference  between  the  two  sides,  after  all  real  estate  has  been  sold,  is  a 
gain  or  loss.  If  all  real  estate  has  not  been  sold,  the  value  of  the  unsold  (which  is  called 
the  inventory)  must  be  entered  on  the  credit  side  before  the  gain  can  be  shown. 

Illustrative  Exercise  : 

19— 

Sept.  1.     Bought  house  and  lot,  No.  485  Madison  Ave.,  for  cash,  $6,000.00. 

2.  Bought  a  farm  in  Henry  County  for  $10,000.00,  and  issued  a  series  of  notes 

in  payment. 

3.  Sold  half  my  farm  for  $5,500.00,  receiving  in  payment  cash,  $3,500.00, 

and  H.  C.  Green's  note  for  $2,000.00. 

4.  Bought  house  and  lot  in  Augusta,  111.,  for  cash,  $3,500.00. 

5.  Sold  to  J.  E.  Smith  house  and  lot,  No. .485  Madison  Ave.,  for  cash,  $3,100.00, 

and  6-month  note,  $3,000.00. 

Inventory:  The  remaining  half  of  the  Henry  County  farm  is  valued  at  cost,  $5,000.00. 
House  and  lot  in  Augusta,  111.,  at  cost. 

Illustration 


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Closing  the  Account:  An  account  showing  loss  or  gain  closes  with  a  loss  or  a  gain, 
not  with  a  balance.  The  inventory  is  entered  on  the  credit  side  in  red  ink  and  added  to 
the  returns.  In  this  case  the  returns,  after  the  inventory  is  included,  exceed  the  cost. 
The  account  therefore  shows  a  gain,  which  is  entered  on  the  smaller  side. 

What  is  Done  with  the  Red  Ink  Entries:  The  inventory  is  brought  down  in  black 
ink  below  the  closing  rulings,  on  the  side  opposite  that  on  which  the  red  ink  entry 
appears.  The  gain  is  brought  down  in  black  ink,  hut  not  on  the  same  account.  It  is  taken 
to  the  loss  and  gain  account  (which  will  be  described  later),  where  it  is  entered  in  black 
on  the  side  opposite  that  on  which  the  red  ink  entry  appears  in  this  account. 


THE    REAL    ESTATE    ACCOUNT  21 

Study  carefully  the  items  in  the  illustration.  From  what  two  sides  has  the  gain  of 
$600.00  arisen?  What  was  the  gain  on  each  sale?  Does  their  total  agree  with  the  result 
of  the  account? 

EXERCISE  IX 
19— 

Sept.  1.  Bought  of  D.  F.  Godfrey,  store  and  lot,  No.  184  Main  St.,  for  $7,200.00. 
Paid  him  cash,  $3,000.00,  and  my  note  for  $3,000.00.  The  balance, 
$1,200.00,  I  credited  to  his  account. 

2.  Bought   a   farm  near  the  city   limits   from  W.  M  Carter   for  $15,000.00. 

Gave  him  in  payment  cash,  $5,000.00,  and  two  notes  (No.  1  and  No.  2) 
for  $5,000.00  each. 

3.  Sold  store  and   lot.   No.    184   Main  St.,   for  $7,500.00.     Received  cash, 

$5,000.00;  note  signed  by  L.  Johnson,  $2,500.00. 

4.  Bought  house  and  lot  in  Elgin,  111.,  for  $4,000.00.     Gave  in  payment  L. 

Johnson's  note,  $2,500.00;  cash,  $1,500.00. 

5.  Settled  my  account  with  D.  F.  Godfrey,  $1,200.00,  and  my  note  in  his  favor, 

$3,000.00,  by  deeding  to  him  my  house  and  lot  in  Elgin. 

Inventory:  Farm  valued  at  cost,  $15,000.00. 

Enter  the  inventory  Sept.  30  and  close  the  account  with  a  gain.  From  what  two  sales 
did  gains  arise?  What  was  the  gain  in  each  case?  Does  the  sum  of  the  two  gains  equal 
the  result  of  the  account?  Bring  the  inventory  dowTi  dated  Oct.  1,  and  continue  Exercise 
X  on  the  same  account. 

EXERCISE  X 
19— 

Oct.  1.     Divided  my  farm  into  twenty  city  lots.     Sold  five  of  the  lots  for  cash, 
$1,000.00  each. 

2.  Sold  five  city  lots  to  H.  M.  Ashleby  at  $1,000.00  each.     In  payment  he 

returned  to  me,  canceled,  my  note  No.  1  of  Sept.  2  for  $5,000.00  in  favor 
of  W.  M.  Carter,  which  Carter  had  endorsed  to  him  on  Sept.  17. 

3.  Exchanged  five  city  lots  for  a  house  and  lot  in  Aurora,  111.,  valued  at  $4,500.00. 

(Two  entries.) 

6.  Redeemed  my  note  No.  2  in  favor  of  W.  M.  Carter  for  $5,000.00  by  deeding 

to  him  the  house  and  lot  in  Aurora  at  $4,200.00  and  one  city  lot  at  $800.00. 

7.  Sold  one  city  lot  for  cash,  $800.00. 

8.  Sold  one  city  lot  to  G.  L.  Kane  on  account,  $850.00. 

9.  Sold  one  city  lot  to  C.  W.  Barnes  on  his  note,  $750.00. 

Inventory:  One  city  lot  valued  at  $750.00. 

Close  the  account. 

What  was  the  gain  on  real  estate  for  October? 

What  would  have  been  the  gain  had  we  inventoried  the  remaining  lot  at  $500.00? 

What  would  have  been  the  gain  had  we  valued  the  lot  at  $1,000.00? 


22  '  ACCOUNTS 

What  effect  has  the  valuation  of  the  inventory  upon  the  gain? 

What  do  you  think  is  the  proper  valuation  to  place  upon  property  inventoried? 

Estimate  the  profit  made  on  the  farm  by  adding  the  gains  arising  from  each  sale  of 
city  lots.  Deduct  $300.00  lost  on  the  sale  of  the  house  and  lot  in  Aurora,  and  see  if  the 
result  agrees  with  the  gain  shown  by  the  account. 

MERCHANDISE  PROBLEMS 

1.  On  Feb.  1,  1913,  Walter  Dey  bought  merchandise  which  cost  him  $346.75.  During  the  month 
he  sold  it  all,  making  the  following  sales:  $52.37,  $48.26,  $72.89,  $63.47,  $42.25,  $57.24,  $34.26,  $45.19, 
$16.27.     Did  he  gain  or  lose  on  his  sales  of  merchandise,  and  how  much? 

2.  During  March,  1913,  you  made  the  following  purchases  and  sales  of  merchandise:  Mar.  4,  pur- 
chase, $58.50;  Mar.  5,  sale,  $27.20;  Mar.  5,  purchase,  $63.24;  Mar.  7,  purchase,  $225.94;  Mar.  8,  sale, 
$10.26;  Mar.  12,  sale,  $42.50;  Mar.  16,  sale,  $62.57;  Mar.  18,  sale,  $23.55;  Mar.  21,  sale,  $74.23;  Mar. 
24,  sale,  $62.50;  Mar.  28,  sale,  $43.72;  Mar.  30,  sale  of  all  goods  remaining  on  hand,  $52.18.  What 
was  the  cost  of  the  goods  sold?     Did  you  gain  or  lose  on  merchandise  during  March,  and  how  much? 

3.  State  in  writing  how  to  find  the  gain  on  merchandise,  when  all  is  sold,  if  the  amounts  paid  for 
it  and  the  amounts  of  the  sales  made,  be  known. 

4.  During  April,  1913,  your  purchases  of  merchandise  amounted  to  $750.65.  At  the  end  of  the 
month  you  found  that  you  had  still  on  hand,  unsold,  merchandise  which  amounted  to  $249.73  at  cost 
price.     What  was  the  cost  of  the  goods  sold  during  April? 

5.  State  in  writing  how  to  find  the  cost  of  goods  sold  if  the  cost  of  all  goods  purchased,  be  known, 
and  the  value  (at  cost  price)  of  the  goods  remaining  on  hand,  be  known. 

6.  During  May,  1913,  Howard's  purchases  of  merchandise  amounted  to  $849.36.  His  sales  for  the 
month  amounted  to  $723.49.  Goods  on  hand  at  the  end  of  the  month,  at  cost  price,  were  valued  at 
$329.63.  What  was  the  cost  of  the  goods  sold  during  May?  What  was  the  amount  of  his  profit  or 
loss  on  merchandise  for  May? 

7.  State  in  writing  how  to  find  the  gain  or  loss  on  merchandise  if  the  following  facts  be  known: 
(a)  Total  purchases;  (b)  Total  sales;  (c)  value,  at  cost  price,  of  goods  remaining  on  hand. 

8.  Howard's  merchandise  inventory  on  June  1,  1913,  was  $329.63.  His  purchases  for  June  were 
$824.36.  His  sales  for  June  were  $729.35.  His  inventory  June  30  was  $350.60.  What  was  the  cost 
of  goods  sold  by  him  during  June?     What  was  the  amount  of  his  merchandise  profit  or  loss  for  June? 

9.  Howard's  merchandise  inventory  on  July  1,  1913,  was  $350.60.  His  purchases  during  July  were 
as  follows:  $100.45,  $72.63,  $125.49,  $83.43.  His  sales  during  July  were:  $62.56,  $49.50,  $38.42,  $29.63, 
$58.75,  $12.43,  $82.21,  $94.15,  $63.36,  $45.63,  $25.41.  On  .July  31  his  inventory,  at  cost  price,  was 
$529.64.  What  was  the  cost  price  of  goods  sold  during  July?  What  was  the  amount  of  Howard's 
profit  or  loss  on  merchandise  during  July? 

10.  Howard's  merchandise  inventory  on  Aug.  1,  1913,  was  $529.64.  His  purchases  and  sales  of  mer- 
chandise during  the  month  were  as  follows:  Aug.  2,  purchase,  $129.62;  Aug.  3,  purchase,  $132.33;  Aug.  6, 
sale,  $52.79;  Aug.  8,  sale,  $65.83;  Aug.  9,  sale,  $74.86;  Aug.  12,  purchase,  $45.94;  Aug.  15,  sale,  $33.35; 
Aug.  18,  sale,  $34.92;  Aug.  21,  purchase,  $98.75;  Aug.  22,  sale,  $35.60;  Aug.  23,  sale,  $52.72;  Aug.  25, 
sale,  $48.36;  Aug.  28,  purchase,  $64.29;  Aug.  29,  sale,  $29.83;  Aug.  30,  sale,  $30.60.  His  inventory  on 
Aug.  31  was  $723.93.  What  was  the  cost  of  goods  sold  during  August?  What  was  Howard's  profit 
or  loss  during  August? 

11.  My  merchandise  inventory  on  Sept.  1,  1913,  was  $500.00.  My  purchases  during  September 
amounted  to  $650.60,  and  my  sales  to  $725.43.  My  inventory  on  Sept.  30  was  $350.50.  What  was  the 
cost  of  goods  sold  during  September?     What  was  the  amount  of  my  gain  or  loss  for  September? 

12.  State  in  writing  how  to  find  the  gain  or  loss  on  merchandise  for  a  given  period  if  the  following 
facts  be  known:  (a)  The  value,  at  cost  price,  of  goods  on  hand  at  the  beginning  of  the  period;  (b)  The  cost 
of  merchandise  purchased  during  the  period;  (c)  The  amounts  of  sales  of  merchandise  made  during  the 
period;  (d)  The  value,  at  cost  price,  of  merchandise  on  hand  at  the  end  of  the  period. 

13.  My  merchandise  inventory  on  Oct.  1,  1913,  was  $350.50.  My  purchases  during  the  month 
amounted  to  $725.83,  and  my  sales  to  $1025.96.  My  inventory  on  Oct.  31  was  $343.50.  What  was  the 
cost  of  goods  sold  during  October?    What  was  the  profit  for  October?    What  was  the  per  cent  of  profit, 


THE    MERCHANDISE    ACCOUNT 


23 


based  on  the  cost  of  the  goods  sold,  or  at  what  per  cent  above  cost  pfrice  shall  I  mark  goods  bought  by 
me  in  future  in  order  to  get  the  same  rate  of  profit  as  during  October? 

14.  State  in  writing  how  to  find  the  per  cent  of  profit  on  merchandise  if  the  following  facts  be  known : 
(a)  The  cost  of  the  goods  sold;  (b)  The  total  amount  received  from  sales. 


MERCHANDISE 

"Merchandise"  includes  those  commodities  which  are  bought  and  sold  in  a  given 
business  for  profit. 

Purpose:  To  show  cost  of  merchandise  and  the  returns  from  sales. 

Method:  Debit  Mdse.  for  its  costs.     Credit  it  for  its  sales. 

Result:  The  difference  between  the  two  sides  after  all  Mdse.  has  been  sold,  will  be  a 
loss  or  a  gain. 

Illustrative  Exercise: 

19— 


Sept. 


1. 
2. 
3. 


Bought  of  H.  O.  Critchell,  on  account,  Mdse.  invoicing  at  $1,460.50. 
Sold  to  W.  A.  Oliver,  on  account,  a  bill  of  goods  worth  $75.00. 
Received  an  invoice  of  Mdse.  from  C.  D.  Miller  amounting  to  $680.40. 
Gave  him  my  note  for  the  amount. 

4.  Sold  Mdse.  for  cash,  $47.50. 

5.  Sold  to  C.  J.  Barber,  Mdse.  on  his  note,  $62.50. 

7.  Received  cash  for  Mdse.,  $25.60. 

8.  Gave  our  note  to  M.  J.  Whitney  for  Mdse.  bought  of  him,  $240.60. 
Inventory:  Mdse.  on  hand  valued  at  cost,  $2,228.50. 


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Explanation  of  Closing:  It  is  desired  to  know  the  gain  on  Mdse.  sold  during  Sep- 
tember. This  cannot  be  found  until  we  know  the  cost  of  goods  sold  during  September. 
That  cost  is  ascertained  in  the  following  way: 


24  ACCOUNTS 

The  total  cost  of  goods  purchased,  as  shown  by  the  debit  side  of  the  account,  was 
$2,381.50.  The  cost  of  the  unsold,  as  ascertained  by  an  actual  inventory  of  goods  now 
in  stock,  is  $2,228.50.  The  difference  between  these  two  amounts  is  $153.00,  the  cost 
of  the  goods  sold. 

The  total  sales  were  $210.60.  The  gain  is  the  difference  between  the  total  sales, 
$210.60,  and  the  cost  of  the  goods  sold,  $153.00,  or  $57.60  gain. 

Process  of  Closing:  It  is  not  proper  to  show  a  subtraction  in  bookkeeping,  however, 
so  instead  of  subtracting  the  Mdse.  inventory  from  the  debit  side  of  the  merchandise 
account,  it  is  added  to  the  credit  side.  This  accomplishes  the  same  result.  The  gain 
is  $57.60,  as  shown  above. 

Bring  down  the  inventory  on  the  opposite  side  of  the  same  account.  The  gain  is 
carried  to  the  loss  and  gain  account  on  the  side  opposite  that  in  which  it  shows  on  the 
merchandise  account. 

This  process  of  closing  has  been  previously  illustrated  in  the  real  estate  account,  and 
is  the  same  for  all  loss  or  gain  accounts. 

EXERCISE  XI 
19— 

Nov.     1.  Bought  of  Weir   &  Co.  on  account,  Mdse.  amounting  to  $576.50. 

2.  Sold  to  P.  K.  Marriott  on  account,  a  bill  of  goods  worth  $53.40. 

3.  Sold  Mdse.  for  cash,  $30.35. 

4.  Bought  for  cash  Mdse.  invoicing  at  $9.75. 

5.  Bought  Mdse.  from  Soule  &  Co.  on  account,  $225.67. 

7.  Paid  cash  for  Mdse.,  $8.75. 

8.  Sold  Mdse.  to  John  Doe  on  credit,  $15.30. 

10.  Bought  of  Revillon  Freres*  a  bill  of  goods  invoicing  at  $383.50.     Gave 

our  note  for  the  amount. 

11.  Sold  H.  C.  linger  on  his  note  a  bill  of  goods  amounting  to  $35.60. 

Inventory:  Stock  on  hand  valued  at  $1,160.00. 
What  was  the  total  cost  of  Mdse.? 
What  was  the  total  returns  on  Mdse.? 

What  was  the  cost  of  goods  sold  during  November?     The  profit? 
Enter  the  inventory,  close  the  account  with  a  loss  or  gain,  bring  down  the  inventory, 
and  continue  Exercise  XII  on  the  same  account. 

EXERCISE  XII 
19— 

Dec.  1.  Bought  on  our  note  Mdse.  invoicing  at  $97.50. 

2.  Paid  cash  for  Mdse.,  $16.14. 

3.  Sold  Harry  Helmer  on  account  Mdse.  amounting  to  $25.60. 

4.  Bought  goods  for  cash,  $12.25. 

6.  Sold  L.  M.  Hawkinson  Mdse.  on  account,  $8.75. 

7.  Paid  cash  for  Mdse.,  $16.25. 

*Revillon  Brothers — French. 


THE    EXPENSE    ACCOUNT  26 

19— 

Dec.     8.     The  proprietor  took  from  stock  for  his  private  use  goods  worth  $10.50. 
(The  goods  were  sold  to  the  proprietor.) 

10.  Sold  to  S.  D.  Marshall  on  account,  goods  worth  $14.55. 

11.  Sold  W.  J.  Frame  on  his  note,  Mdse.  billed  to  him  at  $27.50. 
Inventory:  Goods  on  hand  amount  to  $1,250.00,  valued  at  cost. 

What  was  the  total  cost  of  Mdse.  for  December,  including  inventory  on  hand  Dec.  1? 
What  was  the  total  of  Mdse.  sales  for  December? 
What  was  the  cost  of  the  goods  sold? 

What  was  the  percentage  of  profit,  based  on  the  cost  of  goods  sold? 
Close  the  account,  and  in  bringing  down  the  inventory  Jan.  1,  do  not  fail  to  write 
the  new  year  date  above  the  "Jan.  1." 

EXPENSE  PROBLEMS 

1.  My  expenses  during  January,  1913,  were  as  follows:  Rent,  $75.00;  salaries  of  office  helpers,  $236.62; 
hire  of  scrub  woman,  $3.50;  office  stationery,  $4.50;  postage,  $12.73;  extra  stenographic  labor,  $12.75; 
electric  Ught  bill,  $3.42;  ink,  25ji;  typewriter  ribbon,  75ff.     What  was  the  total  of  expense  for  January? 

2.  My  expenses  for  February,  1913,  were:  Rent,  $75.00;  salaries  of  office  helpers,  $236.62;  oJBBce 
stationery,.  $5.70;  postage,  $14.64;  blank  books  and  forms  for  bookkeeper,  $15.26;  coal  bill,  $35.40;  elec- 
tric Ught  bill,  $3.62.  At  the  end  of  the  month  there  was  on  hand  coal  worth  $27.50.  What  was  the 
amount  of  my  February  expenses? 

3.  Coal  on  hand  March  1,  1913,  $27.50,  was  considered  as  a  March  expense.  Other  expenses  dur- 
ing March  amounted  to  $365.40.  Coal  on  hand  March  31  was  worth  $12.30.  What  was  the  amount  of 
ray  March  e.xpense? 

4.  If  there  is  left  on  hand  at  the  end  of  a  given  period  something  which  has  been  paid  for  during 
that  period  but  will  rfot  be  used  until  the  next  period,  which  period  should  it  be  charged  to?  State  in 
writing  what  steps  you  will  take  to  prevent  such  an  item  from  being  a  charge  against  the  wrong  period 
and  how  you  will  provide  for  having  the  item  charged  against  the  right  period. 

5.  During  April,  1913,  I  paid  out  for  expenses  as  follows:  $75.00,  $37.50,  $43.72,  $12.65,  $1.23, 
$30.60,  $4.50,  $6.25,  $24.65,  $3.21.  This  is  all  that  I  paid  out  during  the  month,  but  I  found  at  the 
end  of  the  month  that  I  owed  my  clerks  for  four  days'  work,  $25.00,  which  I  considered  should  be  treated 
as  a  part  of  the  April  expense  though  not  yet  paid.     What  was  my  expense  for  April? 

6.  My  expenses  for  May,  1913,  were  as  follows:  Rent,  $75.00;  clerk  hire,  $292.22;  extra  janitor 
help,  $3.25;  office  stationery,  $4.63;  postage,  $13.20;  electric  light  bill,  $3.67;  pens  and  penholders,  25jf; 
typewriter  ribbon,  Ibi.  Bearing  in  mind  that  $25.00  of  the  amount  paid  to  my  clerks  though  paid 
this  month  had  already  been  included  in  last  month's  expenses,  state  what  was  the  total  of  my  May 
expense. 

7.  If  work  is  done  half  in  one  month  and  half  in  the  following  month  but  all  of  it  paid  for  during 
the  second  month,  how  are  you  going  to  plan  to  charge  each  month  with  its  proper  amount? 

THE  EXPENSE  ACCOUNT 

Purpose  :  To  contain  a  record  of  the  cost  of  items  commonly  classed  as  expense,* 
such  as  rent,  fuel,  light,  advertising,  repairs,  etc. 

Method:  Debit  the  expense  account  for  costs.     Credit  it  for  returns,  if  any. 

Result:  The  difference  between  the  two  sides  will  be  a  loss. 

*Expenditures  are  of  two  kinds:  Those  which  do  not  occasion  a  loss,  and  those  which  do  occasion 
a  loss.  When  Mdse.,  real  estate,  etc.,  cost  us,  we  receive  the  property,  having  merely  exchanged  one 
asset  for  another.  When  rent,  fuel,  light,  etc.,  cost  us,  however,  a  loss  has  been  incurred,  called 
Expense.     Expenses,  therefore,  are  expenditures  for  the  carrying  on  of  the  business. 


26 


ACCOUNTS 


Illustrative  Exercise: 

19— 

Sept.  1. 
2. 
3. 
3. 

5. 

6. 

8. 

.    9. 

10. 

11. 

13. 

Inventories,  Sept.  30:   Salaries  due  clerks, 
coal  on  hand,  $2.70;  safe  valued  at  $275.00. 

Illustration 


Paid  cash  for  one  month's  rent,  $50.00. 

Paid  the  janitor  cash  for  service,  $7.50. 

Bought  office  stationery  from  the  City  Book  Store,  on  account,  $12.35. 

Gave  the  Marvin  Safe  Co.  our  30-day  note  for  a  safe  for  the  office,  billed  to 

us  at  $275.00. 
Paid  the  gas  bill  in  cash,  $8.60. 
Paid  the  salaries  of  the  office  clerks  in  cash,  $26.00. 
Bought  1,000  2-cent  stamps  for  cash. 
Sold  100  2-cent  stamps  to  G.  N.  Holt  for  cash. 
Secured  a  rebate  of  $0.86  in  cash  from  the  Gas  Co. 
Bought  from  the  Lehigh  Coal  Co.,  on  account,  one  ton  of  coal  for  office 

use,  $3.75. 
Paid  $26.00  in  cash  for  office  salaries. 

.00;  postage  stamps  on  hand,  $16.00; 


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THE    EXPENSE    ACCOUNT  27 

How  much  was  paid  out  for  expenses? 

What  was  the  total  cost  of  expense  for  September,  including  the  inventory? 

What  was  the  amount  of  returns  on  the  expense  account? 

What  was  the  amount  of  returns,  including  the  inventory? 

What  was  the  net  cost  of  expense  for  September? 

Explanation:  The  rebate  on  the  gas  bill  and  the  $2.00  received  from  the  sale  of 
stamps  are  properly  treated  as  reductions  of  cost  by  being  entered  on  the  credit  side.  Note 
that  there  are  inventories  on  both  sides  of  the  expense  account.  The  unpaid  salaries  are 
added  to  the  cost  of  running  the  business  for  the  month  and  the  value  of  the  stamps,  coal, 
and  safe  on  hand  are  deducted  by  being  placed  on  the  credit  side.  Debit  and  credit 
inventories  are  brought  down  separately.    The  loss  is  carried  to  the  loss  and  gain  account. 

Note. — Separate  accounts  may  be  kept  with  Rent,  Salaries,  Furniture  and  Fixtures, 
Insurance,  Postage,  Advertising,  or  any  other  class  of  expense  of  which  a  separate  record 
is  desired.  In  such  cases  these  items  would  not  be  included  in  the  expense  account,  but 
would  be  recorded  in  the  special  accounts  kept  for  the  purpose.  The  expense  account 
might  in  such  a  case  be  more  properly  headed  General  Expense,  or  Unclassified  Expense, 
since  it  only  receives  items  not  entered  in  some  special  account.  The  special  accounts 
would  be  handled  in  precisely  the  same  way  as  the  expense  account  is  handled,  as  described 
in  the  foregoing.  The  loss  shown  by  each  one  of  these  accounts  might  be  closed  into  the 
expense  account  instead  of  into  the  loss  and  gain  account.  The  process  of  closing  accounts 
into  the  loss  and  gain  account  will  be  described  later. 

EXERCISE  XIII 
19— 

Jan.     1.     Paid  cash  for  rent,  S60.00. 

2.  Gave  the  iEtna  Fire  Insurance  Co.  our  check  for  $75.00  for  one  year's  insur- 

ance. 

3.  Paid  the  drayman  for  services,  $4.50  in  cash. 

4.  Paid  the  janitor  in  cash,  $7.50. 

8.  Paid  cash  for  sundry  expenses,  $6.94. 

9.  Paid  the  clerks'  salaries  in  cash,  $25.00. 

10.  Gave  our  10-day  note  to  the  "Tribune"  for  advertising,  $15.00. 

11.  Sub-let  desk  room  in  our  office  to  John  Adams  and  charged  him,  on  account, 

$10.00.     (A  return  to  the  expense  account.) 

12.  Paid  cash  for  postage  and  stationery,  $5.75. 
16.     Paid  the  salaries  of  clerks  in  cash,  $15.00. 
20.     Paid  the  plumber's  bill  for  $16.75  in  cash. 

Inventories,  Jan.  31:  Salaries  of  clerks  unpaid,  $30.00;  eleven  months'  insurance 
unused,  $68.75;  stamps  unused,  $4.00.  Note  that  one  of  these  inventories  increases  the 
expense  for  the  month;  two  of  them  decrease  it. 

INTEREST  ACCOUNT  PROBLEMS 

1.  H.  R.  Smith's  gains  from  interest  during  January,  1913,  were  $12.75,  $8.63,  $13.72,  $25.50,- 
$4.73,  and  $18.26.  His  losses  for  interest  during  the  same  month  were  $30.46,  $22.75,  $16.16,  and  $22.93. 
Did  he  gain  or  lose  during  the  month,  and  how  much? 

2.  D.  B.  Green's  gains  from  interest  during  February,  1913,  and  his  losses  for  interest  during  the 
same  period  were  as  follows:  Feb.  1,  gain,  $21.62;  Feb.  3,  gain,  $1.26;  Feb.  7,  paid  for  interest,  $25.50; 


28  ACCOUNTS 

Feb.  9,  received  as  interest,  $6.25;  Feb.  12,  paid  for  interest,  $12.40;  Feb.  18,  gain,  $2.62;  Feb.  27,  the 
bank  charged  him  for  interest,  $27.56.     Did  he  lose  or  gain  on  interest  during  February,  and  how  much? 

3.  State  in  writing  how  to  determine  the  amount  of  the  gain  or  loss  on  interest  during  a  certain 
period,  if  the  amounts  of  the  separate  gains  and  losses  be  known. 

4.  F.  R.  Farrar's  gains  from  and  losses  for  interest  during  March,  1913,  were  as  follows:  Mar.  1, 
gain,  $12.63;  Mar.  4,  gain,  $13.46;  Mar.  6,  loss,  $17.50;  Mar.  10,  gain,  $4.23;  Mar.  12,  loss,  $22.70;  Mar, 
15,  loss,  $29.75;  Mar.  24,  gain,  $13.75.  On  Mar.  31  he  had  in  his  hands  notes  against  others  on  which 
interest  amounting  to  $5.67  had  accrued,  though  not  yet  paid.  What  was  his  gain  or  loss  on  interest 
during  March? 

5.  F.  R.  Farrar's  total  receipts  for  interest  during  April,  1913,  amounted  to  $52.67,  this  including  the 
$5.67  which  he  had  figured  as  part  of  his  gain  for  last  month.  His  losses  for  interest  during  March 
amounted  to  $72.50.  There  was  no  interest  accrued  either  in  his  favor  or  against  him  at  the  end 
of  ths  month.     What  was  his  gain  or  loss  for  interest  for  the  month? 

6.  State  in  writing:  (a)  How  to  find  the  gain  or  loss  on  interest  for  a  given  period  if  the  following 
facts 4)6  known:  The  separate  gains;  the  separate  losses;  the  interest  accrued  in  your  favor  but  not  yet 
received,     (b)  If  interest  accrued  but  not  yet  received  is  figured  as  part  of  the  gain  for  a  given  period, 

.  how  do  you  avoid  figuring  it  again  as  a  part  of  the  gain  for  the  period  during  which  it  is  actually  received? 

7.  S.  W.  Nichols'  gains  from  and  losses  for  interest  during  May,  1913,  were  as  follows:  May  7,  gain, 
$2.73;  May  9,  gain,  $4.52;  May  11,  loss,  $12.50;  May  16,  gain,  $1.23;  May  21,  loss,  $23.50.  On  May  31 
he  found  that  interest  had  accrued,  though  not  yet  payable,  on  notes  outstanding  against  him,  amount- 
ing to  $8.75.     What  was  his  gain  or  loss  on  interest  during  the  month? 

8.  S.  W.  Nichols'  gain  from  interest  during  June  amounted  to  $72.65.  He  paid  out  for  interest 
$93.72,  this  figure  including  the  $8.75  that  he  had  figured  as  a  part  of  his  May  losses.  What  was  his  loss 
for  interest  during  June? 

9.  State  in  writing:  (a)  How  to  find  the  gain  or  loss  on  interest  for  a  given  period  if  the  following 
facts  be  known:  The  separate  gains;  the  separate  losses;  the  interest  accrued  against  you  but  not  yet 
paid,  (b)  If  interest  accrued  but  not  yet  paid  be  figured  as  part  of  the  loss  for  a  given  period,  how 
do  you  avoid  figuring  it  again  as  part  of  the  loss  during  the  period  during  which  it  is  actually  paid  out? 

THE  INTEREST  ACCOUNT 

Definition  :  Interest  is  the  use  of  money  for  which  compensation  is  paid.  When  we 
hold  another's  money,  we  are  receiving  the  use  of  the  money,  called  interest.  When  we  pay 
for  this  use,  it  is  a  cost  to  us.   When  others  pay  for  the  use  of  our  monej'-,  it  is  a  return  to  us. 

The  expression  "paid  interest"  is  not,  strictly  speaking,  a  correct  one.  We  do  not  "pay  interest," 
but  we  pay /or  interest.  Similarly,  we  do  not  "pay  rent,"  but  we  pay /or  the  rent  or  use  of  the  property. 
Interest  is  the  use  of  money,  just  as  rent  is  the  use  of  property. 

Purpose  :  The  Interest  account  should  contain  a  record  of  the  costs  to  us  for  the  use 
of  other  people's  money,  and  of  the  returns  to  us  from  others  for  their  use  of  our  money. 

Method:  Debit  Interest  for  its  cost;  credit  it  for  its  returns. 

Result:  The  difference  between  the  two  sides  is  the  amount  lost  or  gained  on  account 
of  interest. 

Illustrative  Exercise  : 

19— 

Sept.     1.     Received  $5.00  in  cash  from  J.  H.  Stebbins  for  the  use  of  money  we  loaned 
him. 
2.     J.  H.  Osborne  has  returned  to  us  $100.00,  which  we  loaned  him,  with  $3.60 
additional  for  interest.     (Enter  in  the  interest  account  the  amount 
of  the  interest  only.) 


THE    INTEREST   ACCOUNT 


29 


19— 

Sept. 


3. 
4. 

15. 


16. 


Paid  $5.60  cash  for  interest  on  money  borrowed  of  the  First  National  Bank. 
G.  H.  Burton's  account  is  overdue.     We  have  charged  him  $15.60  for 

interest,  which  he  pays  by  note. 
Paid  our  note  due  the  First  National  Bank  in  cash.     Face  of  the  note, 

$800.00;    interest  accrued,   $2.40;    total  cash  paid,    $802.40.      (The 

amount  of  the  interest  only,  is  entered  in  the  interest  account.) 
Received  cash  of  G.  H.  Burton  in  full  of  his  account  and  accrued  interest. 

Amount  due  on  account,  $650.00;  interest,  $1.47. 


Inventories,  Sept.  30:  Interest  due  from  J.  H.  Stebbins,  $2.50. 

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What  was  the  total  cost  of  interest? 

What  were  the  total  returns  from  interest? 

Why  was  the  inventory  added  to  the  credit  side? 

What  effect  had  the  inventory  upon  the  amount  of  the  gain? 

Closing:  The  inventory  is  brought  down  on  the  opposite  side  of  the  same  account. 
The  gain  is  carried  to  the  opposite  side  of  the  loss  and  gain  account. 


19— 

Feb. 


EXERCISE  XIV 

1.  Paid  cash  for  interest  on  our  note  in  favor  of  the  Second  National  Bank, 

$15.00. 

2.  Received  cash  from  Shelby    &  Co.,  $409.60,  for  their  note  in  our  favor, 

$400.00,  with  $9.60  for  interest.     (Enter  the  interest  only.) 

3.  Paid  in  cash  our  note  in  favor  of  CuUom   &  Co.     Face  of  note,  $200.00; 

interest,  30  days  at  6%,  $1 .00 ;  total,  $201 .00.    (Enter  the  interest  only.) 

4.  The  Gary  Building   &  Loan  Association  sent  us  a  notice  that  $13.50  has 

been  credited  to  our  account  on  their  books,  for  interest. 


30  ACCOUNTS 

19— 

Feb.    5.    Gave  C.  D.  Jackson  our  check  for  $5.00  for  the  semi-annual  interest  on  a 
note  which  he  held  against  us. 

6.     Paid  J.  Bowen  $101.50  in  cash  for  our  note  in  his  favor,  $100.00,  plus 

interest,  $1.50. 
6.     Redeemed  in  cash  our  note  in  favor  of  the  National  Biscuit  Co.  for  $150.00 

with  interest  amounting  to  $2.60. 

8.  Collected  $100.75  in  cash  from  E.  G.  Wells  for  his  note  in  our  favor  for 

$100.00  and  75  cents  interest. 

9.  Our  note  in  favor  of  W.  G.  Evans  for  $200.00,  with  $2.15  accrued  for  inter- 

est, fell  due.     Gave  him  a  new  note  for  the  full  amount. 
10.     Thompson  &  Clark  charged  us  $1.75  for  interest  on  our  account,  which  we 
paid  in  cash. 

Inventories,  Feb.  28:  Interest  accrued  on  our  note  in  favor  of  the  Second  National 
Bank,  $25.00;  on  our  loan  to  the  Gary  Building  &  Loan  Association,  $2.25;  on  our  note 
in  favor  of  C.  D.  Jackson,  $0.70.  (Two  of  these  inventories  increase  the  cost  of  interest. 
The  other  increases  the  returns.) 

What  was  the  total  cost  of  interest  paid  for  during  February? 

What  was  the  total  loss,  including  inventories  of  interest  owed  by  us? 

What  was  the  total  of  returns  on  interest  during  February? 

What  was  the  total  of  gains,  including  inventory  of  interest  due  us? 

Was  the  net  result  of  the  interest  account  a  loss  or  gain,  and  how  much? 

Bring  the  inventories  down  and  continue  Exercise  XV  on  the  same  account. 

EXERCISE  XV 
19— 

Mar.     1.  Paid  for  interest  on  note  in  cash,  $5.25. 

2.  Paid  cash  for  interest  on  a  bill  past  due,  $2.16. 

3.  Received  cash  for  interest  on  government  bonds,  $25.00. 

4.  H.  N.  Walker  paid  us  cash,  $102.00,  for  his  note,  $100.00,  and  interest,  $2.00. 

6.  Paid  our  note  in  favor  of  A.  N.  Palmer  in  cash.     Face  of  note,  $50.00; 

interest,  $1.50;  total  cash  paid,  $51.50. 

7.  Gave  S.  W.  Jackson  our  note  for  $10.64  for  interest  on  money  due  him. 

11.  Received  a  note  for  $30.00  for  interest  on  a  mortgage. 

12.  Received  Sam'l  Jones'  check  for  $4.50  for  interest  on  money  loaned  him. 
14.     Paid  cash  to  the  Second  National  Bank  for  our  note,  $1,000.00,  and  interest 

$33.00. 

16.  Withdrew  from  the  Gary  Building  &  Loan  Association  in  cash  the  amount 

loaned  them,  $250.00,  and  accrued  interest,  $3.27. 

17.  Sold  C.  D.  Jackson  Mdse.  amounting  to  $250.00,  receiving  in  exchange  our 

note  for  $200.00,  with  interest  accrued  amounting  to  $2.70,  and  cash  for 
balance. 

Inventory,  Mar.  31:  Due  the  Citizens'  Bank,  $45.00  for  interest  on  money  borrowed. 


THE   LOSS  AND   GAIN   ACCOUNT  31 

LOSS  AND  GAIN  ACCOUNT  PROBLEMS 

1.  During  January,  1913,  A  gained  $375.60  on  his  merchandise  sales,  but  his  expenses  amounted 
to  $265.65,  and  interest  on  money  borrowed  cost  him  $16.40.     What  was  his  net  gain  for  January? 

2.  On  Feb.  28,  1913,  B's  ledger  showed  gain  on  merchandise,  $450.50;  gain  on  interest,  $4.72;  loss 
on  furniture  and  fixtures,  $15.00;  expenses,  $320.65;  loss  on  real  estate,  $22.50.  What  was  his  net  gain 
for  February? 

3.  C's  ledger  exhibited  the  following  results  for  the  month  of  March,  1913:  Gain  on  merchandise, 
$387.50;  loss  on  real  estate,  $12.50;  loss  on  furniture  and  fixtures,  $6.60;  gain  on  interest,  $6.78;  total 
expense,  $250.50.     What  was  the  amount  of  his  gain  or  loss  for  March? 

4.  State  in  writing  how  to  find  the  net  gain  or  loss  for  a  certain  period  if  the  separate  gains  and 
losses  of  the  business  be  known. 

6.  On  April  30,  1913,  D's  Loss  and  Gain  account  showed  a  loss  of  $25.00  under  date  of  April  10  and 
a  gain  of  $12.00  under  date  of  April  16.  Other  gains  and  losses  of  the  business  for  the  month,  as  shown 
in  the  various  accounts  on  April  30  were:  Gain  on  merchandise,  $270.70;  loss  on  interest,  $8.50;  expenses, 
$190.95.     What  was  the  amount  of  the  net  gain  or  loss  for  the  month? 

6.  E's  ledger  and  inventories  on  May  31,  1913,  exhibited  the  following  facts:  Cost  of  merchandise, 
including  inventory  at  the  beginning  of  the  month,  $227.46;  sales  for  the  month,  $392.80;  inventory 
of  merchandise  on  hand  May  31,  $125.60.  Expense  for  the  month,  $260.65.  Interest  losses,  $10.25; 
interest  gains,  $6.20.  Cost  of  furniture  and  fixtures,  $750.00;  present  valuation,  $740.00.  What  was 
E's  net  loss  or  net  gain  for  May? 

THE  LOSS  AND  GAIN  ACCOUNT 

Purpose  :  To  contain  a  record  of  the  separate  losses  and  gains  as  shown  in  the  various 
accounts  closing  with  a  loss  or  gain;  and  to  contain  any  items  of  loss  or  gain  not  classified 
in  any  special  account. 

Method  :  Debit  Loss  and  Gain  with  the  separate  losses  of  the  business  as  shown  by 
accounts  closing  with  a  loss,  and  for  any  losses  not  entered  in  any  special  account.  Credit 
Loss  and  Gain  with  the  separate  gains  of  the  business  as  shown  by  accounts  closing  with  a 
gain,  and  for  any  unclassified  gains. 

Result:  The  difference  between  the  two  sides  will  be  the  net  loss  or  gain  of  the 
business  for  the  period  of  time  since  the  account  was  last  closed. 

Illustrative  Exercises: 

19— 

Sept.  10.     Found  in  our  cash  register  tonight  $10.00  too  much.     Entered  this  in  the 
loss  and  gain  account. 

20.  Burglars  broke  in  the  store  last  night  and  took  $24.00  worth  of  Mdse. 

21.  T.  F.  Smith  failed  to-day.    He  owed  us  $90.00,  and  as  he  was  able  to  pay 

in  cash  only  60  cents  on  the  dollar,  we  lost  $36.00. 

30.  The  real  estate  account  for  this  month  shows  a  gain  of  $600.00.  (See 
Illustration  of  Real  Estate.)  This  is  entered  in  the  loss  and  gain 
account.  As  it  is  a  gain,  it  is  placed  on  the  credit  side.  Note  that  the 
black  ink  entry  in  the  loss  and  gain  account  and  the  red  ink  entry  in 
the  real  estate  account  are  on  opposite  sides.     This  is  always  the  case. 

30.  The  merchandise  account  for  this  month  shows  a  gain  of  $57.60.  (See 
Illustration  of  Merchandise  Account.)  This  amount  is  entered  in  the 
loss  and  gain  account. 


32 


ACCOUNTS 


19— 

Sept.  30.  The  expense  account  for  this  month  shows  a  loss  of  $190.64.  (See  Illus- 
tration of  Expense  Account.)  This  amount  is  closed  to  the  loss  and 
gain  account. 
30.  The  interest  account  for  this  month  shows  a  gain  of  $20.17.  (See  Illus- 
tration of  Interest  Account.)  This  amount  is  closed  to  the  loss  and 
gain  account. 


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Explanation:  This  account  contains  a  summary  of  all  losses  and  gains  for  the  month. 
The  difference  between  its  two  sides  is  a  net  gain  or  loss,  which  is  placed  on  the  smaller 
side  in  red  ink  at  the  line  of  closing.  This  net  gain  or  net  loss  is  entered  in  the  proprietor's 
account  in  black  ink  on  the  side  opposite  that  in  which  it  is  shown  in  the  loss  and  gain 
account  in  red  ink. 


EXERCISE  XVI 
19— 

April  16.     Found  the  cash  in  the  cash  register  to-night  to  be  $5.00  short. 

17.  W.  H.  Conklin  owed  us  $85.00,  which  we  were  afraid  we  could  not  collect. 
We  offered  to  take  $50.00  in  full  settlement  of  his  account  and  he  paid 
us  $50.00  in  cash. 

30.  The  merchandise  account  for  this  month  shows  a  gain  of  $185.51.  (Write 
the  word  Mdse.  in  the  explanation  column.) 

30.     The  expense  account  for  this  month  shows  a  loss  of  $60.75. 

30.     The  interest  account  shows  a  gain  of  $10.63. 

30.     Our  advertising  account  shows  a  loss  of  $22.50. 


Close  the  account,  using  the  explanation  Proprietor  in  the  closing  entry, 
to  what  account  the  net  gain  is  carried. 


This  shows 


THE    proprietor's    ACCOUNT  33 

PROPRIETOR'S  ACCOUNT  PROBLEMS 

1.  The  proprietor  of  a  certain  business  began  business  with  an  investment  of  $10,000.00  and  debts 
totaling  $750.60.  During  the  first  month  his  net  gain  was  $225.00,  which  he  allowed  to  remain  in  the 
business.  What  was  the  business  worth  at  the  end  of  the  month,  no  further  investments  or  withdrawals 
having  been  made? 

2.  W.  H.  WyUe  invested  $12,000.00  in  the  grocery  business  on  February  1,  1913.  His  debts  at  the 
time  of  beginning  business,  which  were  assumed  by  the  business,  amounted  to  $4250.00.  On  Feb.  13 
he  increased  his  investment  $1000.00.  On  Feb.  21  he  withdrew  $50.00  for  his  own  use.  His  net  gain 
for  February,  which  he  allowed  to  remain  in  the  business,  was  $240.40.  What  was  the  amount  of  his 
investment  on  Feb.  28? 

3.  W.  H.  Wylie's  investment  in  business  on  March  1,  1913,  was  the  amount  determined  in  the 
last  problem  as  the  amount  of  his  investment  on  Feb.  28.  His  gains  and  losses  for  the  next  four  months 
were  as  follows:  March,  gain,  $222.65;  April,  gain,  $350.68;  May,  loss,  $57.63;  June,  gain,  $129.64. 
On  March  3,  he  withdrew  from  the  business  $150.00  for  his  own  use.  On  May  16,  he  increased  his 
investment  $550.00.  No  other  withdrawals  from  or  additions  to  his  investment  having  been  made, 
and  all  gains  having  been  allowed  to  remain  in  the  business,  what  was  W.  H.  Wyhe's  investment  on 
June  30? 

4.  H.  N.  Nolan,  E.  J.  Doolin,  and  E.  C.  McGuire  began  business  as  partners  on  July  1,  1913.  Mr. 
Nolan  invested  $10,000.00.  Mr.  Doolin  invested  $8000.00  but  had  debts  of  $1250.00  which  the  busi- 
ness assumed.  Mr.  McGuire  invested  $7500.00.  During  the  month  Mr.  Nolan  increased  his  invest- 
ment $1000.00  at  one  time  and  $500.00  at  another.  Mr.  Doohn  withdrew  $75.00,  $54.50,  and  $44.25, 
at  different  times,  for  his  own  use.  Mr.  McGuire  made  no  withdrawals  or  investments  during  the 
month.  On  July  31  it  was  found  that  the  net  gain  of  the  business  for  July  had  been  $933.21,  and  this 
was  allowed  to  remain  in  the  business,  equally  divided  among  the  partners.  What  was  the  investment 
of  each  partner  on  July  31? 

5.  State  in  writing  how  to  find  the  amount  of  the  proprietor's  present  investment  if  the  following 
facts  be  known:  (a)  His  investment  at  some  previous  date;  (b)  his  additional  investments  and  with- 
drawals since  that  date;  (c)  his  gain  since  that  date  if  allowed  to  remain  in  the  business,  or  his  loss  since 
that  date. 

THE  PROPRIETOR'S  ACCOUNT 

Purpose:  To  contain  a  record  of  the  amounts  invested  by  the  proprietor  and  with- 
drawn by  him. 

Method:  Credit  the  proprietor  for  his  investments;  debit  him  for  his  withdrawals. 

Result:  The  difference  between  the  two  sides  will  be  the  amount  of  the  proprietor's 
interest  in  the  business. 

Note. — The  Proprietor's  account  is  like  any  personal  account  as  far  as  the  book- 
keeping features  are  concerned.  The  proprietor  is  debited  for  what  he  costs  the  business 
(in  withdrawals)  and  credited  for  what  he  produces  (by  investment). 

Illustrative  Exercise: 

19— 

Sept.     1.     H.  M,  Strong,  the  proprietor,  invested  cash,  $2,000.00. 

10.     H.  M.  Strong  withdrew  for  personal  use  Mdse.  valued  at  $7.90. 

15.     H.  M.  Strong  withdrew  cash,  $50.00,  with  which  to  pay  his  house  rent. 

20.     H.  M.  Strong  made  another  cash  investment,  $1,000.00. 

30.  The  gain  of  the  business  for  September,  as  shown  by  the  loss  and  gain 
account  (see  Illustration),  was  $437.13.  Instead  of  withdrawing  this 
gain,  Mr.  Strong  allowed  it  to  remain  in  the  business,  the  amount  being 
carried  to  his  account  as  an  addition  to  his  investment. 


34 


ACCOUNTS 


Illustration 


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Explanation:  The  amount  of  the  gain  for  the  month,  taken  from  the  loss  and  gain 
account,  is  entered  on  the  proprietor's  account  in  black  ink  at  the  end  of  the  month,  the 
name  of  the  loss  and  gain  account  being  used  as  an  explanation.  The  account  is  then 
balanced.  The  amount  of  the  balance  shows  what  the  business  owes  Mr.  Strong.  If  the 
debit  side  of  Mr.  Strong's  account  had  been  the  larger,  he  would  have  owed  the  business, 
and  would  be  said  to  have  been  "insolvent."  The  balance  is  brought  down  below  the 
rulings  on  the  opposite  side,  in  black  ink.  The  term  "present  worth,"  or  "investment'' 
or  "net  capital"  or  any  similar  expression,  can  be  used  instead  of  the  word  "balance." 


19— 

May    1. 
1. 


EZEBCISE  XVn 


T.  L.  Foster  began  business  to-day  with  a  cash  investment  of  $3,500.00. 
On  starting  business  Mr.  Foster  owes  G.  W.  Champion  $465.00,  on  account, 
which  debt  is  assumed  by  the  business.     (Debit  T.  L.  Foster.) 
10.     Mr.  Foster  made  a  further  investment  of  property  worth  $2,000.00. 
12.     Mr.  Foster  withdrew  cash,  $20.00- 
15.     Mr.  Foster  received  $1,364.50  in  cash  from  the  maturing  of  an  endowment 

policy,  and  invested  it  in  the  business. 
20.     Mr.  Foster  paid  his  personal  grocery  bill,  $25.60,  from  the  cash  register. 
31.     Mr.  Foster's  salary  of  $200.00  is  carried  to  the  credit  of  his  account. 
31.     Mr.  Foster's  house  rent,  $35.00,  is  paid  out  of  the  cash  register. 
31.     The  gain  of  the  business  for  the  month,  $124.67,  is  carried  to  the  credit  of 
the  proprietor. 
Balance  his  account.     Do  not  forget  to  bring  the  balance  down. 

CLASSIFICATION  OF  BOOKS 

The  books  used  in  any  set  of  books  are: 

1.  Books  of  Original  Entry.     2.  Books  of  Final  Entry.     3.  Auxiliary  Books. 

Books  of  Original  Entry  are  the  books  in  which  transactions  are  first  recorded,  at  the 
time  of  their  occurrence.  Entries  appear  in  these  books  in  the  order  in  which  the  trans- 
actions occurred.     The  book  of  original  entry  which  you  will  first  study  is  the  journal. 

Books  of   Final  Entry.     The  principal  book  of  final  entry  is  the  ledger.     Transactions 


THE  JOURNAL  35 

are  transferred  from  the  books  of  original  entry  to  the  ledger,  where  they  are  arranged  in 
classified  order,  in  accounts. 

Auxiliary  Books.    These  are  books  in  which  are  recorded  certain  additional  facts  or 
memorandums  which  are  of  interest  or  importance. 


THE  JOURNAL 

A  BOOK  OF    ORIGINAL  ENTRY 

A  Business  Transaction  is  an  even  exchange  of  commodities,  services,  or  other  things  of 
Value,     The  values  of  the  things  exchanged  are  assumed,  by  the  parties  trading,  to  be  equal. 

Double  Entry  Bookkeeping  is  a  system  by  which  a  record  is  made  of  both  sides  of  every 
exchange.     Equal  debits  and  credits  are  recorded  for  every  transaction. 

Rule  foe  Debiting  and  Crediting  Accounts:  Debit  that  which  is  received  or  which 
costs  value.     Credit  that  which  is  disposed  of  or  which  produces  returns. 

That  which  is  received  is  exactly  the  same  as  that  which  costs  in  every  case.  This  is  not  always  clear 
to  beginners,  however.  In  some  cases  it  is  easier  for  the  beginner  to  answer  the  question,  "What  has 
been  received?"  In  other  cases  it  is  easier  to  answer  the  question,  "What  has  cost  us  something?" 
Whenever  either  of  these  questions  is  answered,  the  answer  is  the  name  of  the  account  to  be  debited. 
Similarly,  that  which  has  been  disposed  of  is  the  same  as  that  which  produces  returns,  and  is  the  thing  which 
is  to  be  credited. 

Since  that  which  is  received  or  which  costs  us,  and  that  which  is  disposed  of  or  which 
produces  returns  are  of  equal  value,  the  amount  or  amounts  debited  will  be  equal  to  the 
amount  or  amounts  credited. 

The  Journal.  This  is  a  book  of  original  entry  in  which  are  recorded  the  equal  debits 
and  credits  arising  from  transactions.  Transactions  are  recorded  in  the  journal  at  the 
time  of  their  occurrence,  and  hence  in  the  order  of  their  occurrence. 

Journalizing  is  the  process  of  determining,  by  the  rule  for  debiting  and  crediting 
accounts,  what  account  is  to  be  debited  and  what  account  is  to  be  credited,  in  each  trans- 
action. The  items  of  debit  and  credit  are  arranged  in  the  journal  in  a  form  convenient 
for  transferring  to  the  ledger. 

Illustrative  Exercise: 

19— 

Sept.     1.  Bought  of  John  Brown  for  cash,  10  brl.  apples  at  $2.50,  $25.00. 

2.  Sold  Amos  Smith  on  his  note,  6  brl.  apples  at  $3.10,  $18.60. 

3.  Bought  of  James  Ransom  for  cash,  10  brl.  flour  at  $6.00,  $60.00. 

4.  Bought  of  J.  Thurman,  a  house  and  lot,  No.  271  Park  Ave.,  for  $2,500.00. 

Gave  him  my  note  in  exchange. 

5.  Sold  to  Wm.  Allen,  361  Church  St.,  on  account,  10  brl.  apples  at  $2.75, 

$27.50;  5  brl.  flour  at  $6.60,  $33.00.     Total,  $60.50. 
7.     Bought  of  W.  Parsons  for  cash,  a  farm  in  Henry  County  for  $4,000.00. 


3G 


accounts 
Illustration 


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Explanation:  Applying  the  rule  for  debiting  and  crediting  accounts  to  the  first  trans- 
action, we  find  that  the  merchandise  account  is  to  be  debited  $25.00  and  the  cash  account 
is  to  be  credited  $25.00.  This  debit  and  credit  is  indicated  in  the  journal  entry  hy  position. 
The  debit  item  is  written  on  the  first  line,  the  name  of  the  account  being  written  at  the  ex- 
treme left  of  the  wide  space,  and  the  amount  being  written  in  the  left  hand  column.  The 
credit  item  is  written  on  the  line  below,  the  name  of  the  account  being  indented  to  about 
one  and  a  half  inches  from  the  left  margin,  and  the  amount  being  written  in  the  right-hand 
money  column.  Sometimes  a  light  line  is  ruled  down  the  page  to  show  where  to  write  the 
name  of  the  account  credited.  (If  the  wide  column  is  ruled  squarely  down  the  middle,  do 
not  use  this  ruling  as  a  guide  line,  as  you  need  more  space  for  the  credit  entry.)  In  any 
case  this  margin  should  be  precise.  This  relative  position  should  never  be  even  slightly 
varied,  as  debit  and  credit  are  indicated  in  the  journal  by  position  alone. 


THE  JOURNAL 


37 


The  date  of  the  transaction  is  written  above  the  entry  in  each  case,  as  shown  in  the 
illustration.  Leave  blank  the  narrow  columns  at  the  left — their  purposes  will  be  explained 
later.  The  first  date  on  each  page  is  written  out  in  full,  including  the  month  and  year. 
Other  dates  on  the  page  may  be  shown  by  figures  only. 

When  there  are  more  than  one  debit  or  more  than  one  credit,  they  should  be  shown 
as  in  the  following  illustration. 

Illustrative  Exercise: 


19— 

Sept. 


1.  Sold  J.  H.  Perkins,  680  La  Salle  St.,  house  and  lot,  No.  226  Monroe  St.,  for 
$3,000.00.  Received  in  payment  cash,  $1,000.00,  and  his  note  due  in 
two  years  for  $1,000.00.     Charged  him  $1,000.00  on  account. 

4.  Bought  of  Henry  Turner,  723  Polk  St ,  20  brl.  flour  at  $8.00,  $160.00.  Paid 
him  cash,  $60.00;  balance  on  account,  $100.00. 

9.  Sold  R.  Snyder  3  shares  Illinois  Central  Railroad  stock  at  $125.00,  $375.00, 
and  1  share  Union  Bank  stock,  $200.00.  Received  in  p.ayment  his  note 
at  30  days  for  $200.00,  and  cash  for  balance.  (Accounts  are  kept  with 
Union  Bank  Stock  and  /.  C.  R.  R.  Stock.)  • 


Illustration 


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38 


ACCOUNTS 


When  recording  the  first  transaction  with  any  person,  write  the  person's  address  in 
the  journal,  just  opposite  or  just  beneath  the  name,  in  a  small,  neat  hand. 

Transactions  to  be  Journalized 
19— 

Jan.       1.     Richard  A.  Strong  has  this  day  commenced  business  with  a  cash  capital  of 
$2,000.00. 

2.  Bought  of  Caldwell  &  Perkins,  723  S.  Clark  St.,  for  cash,  150  lb.  Elgin 

creamery  butter  at  33^^,  $50.00;  75  lb.  maple  sugar  at  15^,  $11.25; 
25  lb.  Royal  Ceylon  tea  at  40^,  $10.00;  25  lb.  Santos  coffee  at  18^, 
$4.50;   125  doz.  eggs  at  30^,  $37.50.     Total,  $113.25. 

3.  Bought  of   H.  C.    Harriman,   Winona,    Minn.,   on  my  note  at  ten  days, 

50  brl.  Ceresota  flour  at  $5.50,  $275.00;  75  brl.  Ben  Davis  apples  at 
$1.75,  $131.25;  150  bu.  Burbank  potatoes  at  80^,  $120.00.  Total 
$526.25. 

4.  Sold  to  J.  D.  Williamson,  3186   Westminster  Ave.,  for  cash,  50  lb.  Elgin 

butter  at  35^,  $17.50;   25  brl.  Ceresota  flour  at  $5.75,  $143.75;   20  brl. 
Ben  Davis  apples  at  $2.00,  $40.00.     Total,  $201.25. 
6.     Bought  of  W.  N.  Furbeck,  San  Francisco,   Cal.,  for  cash,  200  boxes  Cali- 
fornia grapes  at  25^,  $50.00;  50  boxes  California  navel  oranges  at  $1.60, 
$80.00.     Total,  $130.00. 

8.  Sold  to  James  Duncan,  Hammond,  Ind.,  on  account,  80  lb.  Elgin  butter  at 

40^,  $32.00;  100  doz.  eggs  at  32^,  $32.00;  100  bu.  Burbank  potatoes 
at  75^,  $75.00;   25  brl.  apples  at  $2.10,  $52.50.     Total,  $191.50. 

9.  Received  from  James  Duncan  on  account,  cash,  $100.00. 

10.     Bought  of  E.  E.  Beaver,  425  S.  Water  St.,  100  boxes  California  grapes  at 
40^,  $40.00;  50  boxes  oranges  at  $2.00,  $100.00;  250  lb.  maple  sugar  at 
20^,  $50.00;  25  lb.  Royal  Ceylon  tea  at  50^,  $12.50.     Total,  $202.50. 
Gave  in  payment  cash,  $50.00;  my  note  at  30  days  for  balance,  $152.50. 

13.  Paid  H.  C.  Harriman  for  my  note  of  the  3d  inst.  Face  of  note,  $526.25. 
Gave  in  payment  50  boxes  oranges  at  $2.25,  $112.50;  100  boxes  Cali- 
fornia grapes  at  50^,  $50.00.     Total,  $162.50.     Cash  for  balance,  $363.75- 

15.  Paid  cash  for  rent  of  store  for  the  current  month,  $50.00.     (Debit  Expense.) 

16.  Bought  of  Washburn-Crosby  Co.,  Minneapolis,  Minn.,  on  account,  50  brl. 

Gold  Medal  flour  at  $5.60,  $280.00.  Paid  cash  for  freight  on  the  ship- 
ment, $11.40.     (Two  entries.     The  freight  is  considered  a  cost  to  Mdse.) 

18.  Bought  of  Diebold  Safe  &  Lock  Co.,  194  Fifth  Ave.,  on  account,  a  burglar- 
proof  safe  for  my  office,  $100.00.     (Debit  Furniture  &  Fixtures.) 

20.  Received  of  James  Duncan  cash,  $75.00,  to  apply  on  account.  Sold  to 
Thompson  &  Smith,  443  W.  Randolph  St.,  on  account,  25  brl.  Gold 
Medal  flour  at  $6.00,  $150.00;  25  doz.  eggs  at  44^,  $11.00;  50  bu.  Bur- 
bank potatoes  at  75^,  $37.50.     Total,  $198.50. 

POSTING  TO  THE  LEDGER  OR  BOOK  OF  FINAL  ENTRY 

You  have  learned  that  all  the  original  entries  in  the  journal  are  made  in  the  order  of 
their  occurrence  and  that  they  are  later  transferred  to  the  ledger  or  book  of  final  entry, 


EXERCISE   IN  JOURNALIZING  39 

where  they  are  classified  in  proper  accounts.     The  process  of  transferring  these  items  is 
called  posting. 

The  process  of  posting  from  the  journal  to  the  ledger  may  be  better  illustrated  than 
defined.  You  will  therefore  journalize  the  transactions  for  February  and  follow  closely 
the  instructions  for  posting. 

Transactions 

19— 

Feb.    1.     (Student)  commenced  business  this  day  with  a  cash  capital  of  $3,500.00. 

2.  Bought  from  Bronson  &  Baker,  1625  Dearborn  Ave.,  50  doz.  men's  linen 

shirts  at  $10.00,  $500.00;  100  doz.  lac^ies'  linen  handkerchiefs  at$2.50, 
$250.00;  2  cases  paper  cambric,  4,000  yd.,  at  10^,  $400.00;  200  yd. 
bleached  cotton  at  10^,  $20.00.  Total,  $1,170.00.  Gave  in  payment 
my  note  at  9  days  for  $600.00;   cash  for  balance,  $570.00. 

3.  Bought  from  J.  V.  Farwell  &  Co.,  148  Market  St.,  on  account,  50  yd.  Irish 

linen  at  40^,  $20.00;    100  yd.  sheeting  at  11^,  $11.00.     Total,  $31.00. 

4.  Sold  to  W.  O.  Thomas,  First  National  Bank  Building,  on  account,  10  doz. 

men's  linen  shirts  at  $12.00,  $120.00;  5  yd.  Irish  linen  at  50^,  $2.50. 
Total,  $122.50. 

5.  Sold  to  D.  Nugent  &  Co.,  St.  Louis,  on  their  note  at  30  days,  1  case  paper 

cambric,  2,000  yd.,  at  11^,  $220.00;    10  doz.  ladies'  linen  handkerchiefs 

at  $3.00,  $30.00.     Total,  $250.00. 
7.     Bought  from  Wanamaker  &  Sons,  New  York,  on  my  note  at  30  days,  1,000 

yd.  gingham  at  10^,  $100.00;  55  yd.  black  silk  at  $2.75,  $151.25;   100  yd. 

broadcloth  at  $3.75,  $375.00.     Total,  $626.25. 
9.     Sold  to  G.  B.  Fairchild,  Omaha,  on  account,  30  yd.  black  silk  at  $3.00,  $90.00; 

15  yd.  Irish  linen  at  55^,  $8.25.     Total,  $98.25. 

11.  Paid  Bronson  &  Baker  cash  for  my  note  of  the  2d  inst.,  $600.00. 

12.  Sold  to  Henry  Russell,  Milwaukee,  Wis.,  on  account,  50  yd.  sheeting  at  12^, 

$6.00;  200  yd.  gingham  at  12^,  $24.00;  10  doz.  men's  linen  shirts  at 
$12.00,  $120.00.     Total,  $150.00. 

15.  Sold  to  Chas.  W.  Harms,  2329  Michigan  Ave.,  for  cash,  14  yd.  broadcloth  at 

$4.00,  $56.00;  1  case  paper  cambric,  2,000  yd.  at  12^,  $240.00.  Total, 
$296.00.  Bought  of  J.  B.  Clark,  5711  Wabash  Ave.,  store  and  lot,  No.  185 
Lake  Street,  for  $4,000.00.  Gave  in  payment  cash,  $2,000.00;  my  note 
at  60  days  for  $2,000.00.     Total,  $4,000.00. 

16.  Received  cash  from  W.  O.  Thomas,  on  account,  $75.00;    also  $50.00  from 

Henry  Russell  on  account.     (Separate  entries.) 

18.  Sold  to  G.  B.  Fairchild,  Omaha,  Neb.,  on  account,  100  yd.  bleached  cotton 

at  12^,  $12.00;  20  doz.  men's  linen  shirts  at  $12.50,  $250.00.  Total, 
$262.00. 

19.  Received  from  Henry  Russell,  Milwaukee,  his  note  at  30  days  to  cover  his 

account,  $100.00. 

20.  Sold  to  F.  E.  Arnold,  1801  Michigan  Ave.,  20  yd.  Irish  linen  at  50^,  $10.00; 

800  yd.  gingham  at  12^,  $96.00;  16  yd.  broadcloth  at  $4.00,  $64.00. 
Total,  $170.00. 


40 


ACCOUNTS 


Feb.  22.     Received  of  G.  B.  Fairchild,  on  account,  cash,  $125.00;  his  note  at  31  days 
for  $200.00.     Total,  $325.00. 

23.  Paid  taxes  on  store  and  lot  No.  1317  State  St.,  for  current  year,  in  cash, 

$18.30.     (Debit  Expense.) 

24.  Received  cash  of  W.  O.  Thomas,  on  account,  $45.00. 

25.  Sold  to  Henry  Russell,  on  account,  50  yd.  sheeting  at  13^,  $6.50;    50  doz. 

ladies'  linen  handkerchiefs  at  $3.00,  $150.00.     Total,  $156.50. 

26.  Received  cash  of  F.  E.  Arnold,  on  his  account,  $100.00.     Paid  Wanamaker 

&  Sons  cash  on  my  note  of  the  7th  inst.,  $450.00. 

27.  Sold  to  W.  O.  Thomas,  on  account,  10  doz.  men's  linen  shirts  at  $12.00, 

$120.00. 

28.  Paid  cash  to  L.  H.  Carter  for  2  tons  of  coal  for  use  in  the  store,  at  $6.50  per 

ton,  $13.00.  Received  of  D.  Nugent  &  Co.,  cash  on  their  note  of  the 
5th  inst.,  $150.00.  Received  cash  of  the  following  persons  on  account: 
G.  B.  Fairchild,  $20.00;  F.  E.  Arnold,  $40.00;  W.  0.  Thomas,  $50.00. 
Paid  cash  for  the  following  expenses:  Clerks'  wages  to  date,  $60.00; 
gas  bill  for  the  month,  $10.80;  advertising  in  the  "Times,"  $12.00. 
Total,  $82.80. 

Open  accounts  in  the  ledger  as  follows,  allowing  for  each  account  one  line  for  the  head- 
ing, one  line  for  the  ruling,  and  for  the  entries  the  number  of  hues  indicated  below: 

Page  1.  Student  (your  name),  5  lines;  Merchandise,  13  lines;  Real  Estate,  5  lines; 
Expense,  5  lines.  Page  2.  Cash,  14  lines;  Notes  Receivable,  5  lines;  W.  0.  Thomas, 
5  lines;  G.  B.  Fairchild  5  lines.  Page  3.  Henry  Russell,  5  lines;  F.  E.  Arnold,  5  iines; 
Notes  Payable,  5  lines;  J.  V.  Farwell  &  Co.,  5  lines. 

In  opening  accounts  with  persons,  write  the  address  on  the  double-ruled  line  just  below 
the  name.  Write  in  a  small,  neat  hand,  far  enough  toward  the  right  side  to  leave  room 
for  the  year  date  of  the  credit  side. 

The  first  transaction  in  the  journal  is: 


February  1,   19 — 


Page  1 


Folio 


Debit  Account 
Cash 


Credit  Account 


Student 


Debit  Amo 
3500 


unt 
00 


Credit  Amo 


unt 


3500100 


Note  that  the  Folio  column  is  left  blank  at  the  time  of  making  the  entry. 

Posting 

The  first  item  in  the  first  transaction  is  Cash  Dr.  $3,500.00.  Enter  this  amount  in  the 
cash  account  on  page  2,  on  the  debit  side.  Write  the  date  in  the  date  column  and  the 
amount  in  the  money  column,  as  instructed  in  working  the  cash  account  on  pa^e  6. 

In  the  explanation  column  in  the  ledger  write  the  name  of  the  account  credited  in  the 
same  transaction.  (In  this  case,  the  student's  account.  The  explanation  would,  there- 
fore, be  the  student's  name.) 


POSTING 


41 


In  the  folio  column  in  the  ledger  write  the  journal  page  from  which  the  entry  was  trans- 
ferred (1). 

In  the  folio  column  of  the  journal  write  the  ledger  page  to  which  the  entry  was  trans- 
ferred (2). 

Post  the  credit  side  of  the  same  transaction.  Enter  the  credit  in  the  student's  account, 
writing  the  date  in  the  date  column,  the  word  "Cash"  (the  name  of  the  account  debited) 
in  the  explanatory  column,  the  journal  page  (1)  in  the  folio  column,  and  the  amount  in  the 
money  column,  all  on  the  credit  side,  of  course.  Then  enter  the  ledger  page  on  which  the 
student's  account  appears  (1)  in  the  folio  column  of  the  journal. 

When  the  first  transaction  has  been  posted,  the  cash  account  and  student's  account 
in  the  ledger  will  look  like  these: 


CASH 


19— 


Page  2 


The  folio  column  in  the  journal  will  contain  the  figure  2  opposite  the  word  "Cash," 
and  the  figure  1  opposite  the  word  "Student." 

Post  the  second  transaction  in  the  same  way.  Debit  the  merchandise  account  $1,170.00, 
writing  in  the  explanation  column  the  words  "Cash  &  Notes  Pay."  (the  names  of  the  credit 
items).  Write  the  journal  page  in  the  folio  column  of  the  ledger,  and  the  ledger  page  in  the 
folio  column  of  the  journal.  Post  the  $600.00  to  the  credit  side  of  the  notes  payable 
account  and  the  $570.00  to  the  credit  side  of  the  cash  account,  using  the  explanation 
"Mdse."  in  each  case.  Always  write  the  journal  page  in  the  ledger  and  the  ledger  page  in 
the  journal  in  the  folio  column,  opposite  the  item,  at  the  exact  time  of  posting. 

The  explanation  used  in  the  ledger  when  posting  from  the  journal,  consists  of  the  name  or  names  of 
the  account  or  accounts  affected  on  the  side  of  the  transaction.  If  there  are  too  many  of  such  names  to 
write  in  the  small  space  allotted,  use  the  word  "  Sundries,"  which  means  "  Several." 

Do  not  fail  to  put  the  page  numbers  in  the  folio  columns  at  the  precise  time  of  posting.  These  page 
numbers  not  only  serve  as  references  from  one  book  to  the  other,  to  be  used  in  tracing  items  from  the 
journal  to  the  ledger  or  vice  versa,  but  they  have  another  purpose  which  is  quite  as  important:  The 
entering  of  the  page  shows  that  the  transaction  has  been  posted,  and  great  caution  should  be  taken  to 
enter  it  at  the  precise  moment  the  posting  is  done,  in  order  to  prevent  error.  For  if  the  bookkeeper  should 
put  down  his  page  mark  in  the  journal  in  advance,  intending  to  make  his  entry  later,  he  might  forget,  and 
the  posting  would  be  omitted.  On  the  other  hand,  if  the  bookkeeper  should  post  all  his  entries,  intending 
to  put  his  page  marks  in  later,  he  would  never  know  what  had  been  posted  and  what  had  not  been,  and 
might  either  omit  an  item  or  get  one  posted  twice.  Leave  nothing  to  memory.  Enter  the  pages  in  both 
journal  and  ledger  at  the  precise  moment  the  posting  is  done.  Do  not  ignore  this  instruction.  Neglect 
of  this  causes  bookkeepers  and  bookkeeping  students  more  trouble  than  any  one  thing  pertaining  to  the . 
detail  of  bookkeeping. 

Post  the  rest  of  the  transactions. 


42 


ACCOUNTS 
THE  TRIAL  BALANCE 


In  every  transaction  there  has  been  an  even  exchange.  There  have  been  equal  debits 
find  credits  in  the  journal  for  every  transaction.  The  debits  posted  to  the  ledger  have, 
therefore,  exactly  equalled  the  credits  posted  to  the  ledger.  It  follows  that  the  total  debits 
must  equal  the  total  credits,  if  no  mistake  has  been  made. 

The  trial  balance  is  a  list  of  the  ledger  accounts  and  the  total  debits  and  credits  of  each, 
prepared  for  the  purpose  of  ascertaining  whether  the  total  of  the  debits  actually  equale 
the  total  of  the  credits.     If  it  does,  the  ledger  is  said  to  be  "in  balance." 


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The  above  trial  balance  is  taken  from  the  ledger  footings  after  the  transactions  for 
February  have  been  posted  and  before  any  accounts  are  closed.  The  amounts  are  to  be 
ascertained  by  you. 

Add  the  debit  side  and  the  credit  side  of  each  account  in  the  ledger.  Place  the  footings 
in  the  money  columns,  in  small,  neat  lead-pencil  figures  close  to  the  last  figure  in  the  column 
in  each  case.  Then  make  a  list  of  the  accounts,  under  the  heading  "Trial  Balance,  Feb.  28, 
19 — ,"  writing  the  total  debits  and  total  credits  opposite  each  account  in  the  list.  In  the 
Folio  column,  place  the  ledger  pages  on  which  the  accounts  appear.  Rule  a  single  red 
line  under  the  last  item  in  the  trial  balance,  and  foot  the  columns.  The  footings  of  the 
two  sides  should  be  equal.     Rule  a  double  red  line. under  the  footings. 


THE  TRIAL   BALANCE  43 

If  the  debit  and  credit  totals  in  the  trial  balance  are  not  equal,  some  mistake  has  been 
made.     The  mistake  may  be  in  addition;  it  may  be  in  posting.     You  must  find  it. 

To  find  your  error,  proceed  as  follows: 

Add  the  trial  balance  again.  If  you  find  your  addition  to  be  correct,  compare  the 
amounts  in  the  trial  balance  with  the  lead-pencil  footings  in  your  ledger.  As  you  find  each 
amount  to  have  been  correctly  entered  in  the  trial  balance,  and  on  the  proper  side,  place 
a  neat  check  mark  ( i^ )  opposite  the  amount  in  the  trial  balance  and  another  opposite  the 
footing  in  the  ledger.  The  mistake  still  remaining  undiscovered,  add  your  ledger  columns 
again  carefully,  adding  downward  if  you  added  upward  the  first  time.  Then  check  all 
debit  items  in  the  ledger  against  debit  items  in  the  journal,  placing  check  marks  opposite 
each  entry  in  the  ledger  and  in  the  journal  as  you  find  them  to  agree.  Then  check  all 
credit  items  in  the  ledger  against  corresponding  credit  items  in  the  journal.  This  checking 
should  be  done  backward,  from  the  ledger  to  the  journal,  not  from  the  journal  to  the  ledger. 
Last,  inspect  all  transactions  in  the  journal,  to  be  sure  the  debits  and  credits  in  each  trans- 
action are  equal.  Inspect  the  ledger,  journal,  and  trial  balance  to  be  sure  that  everything 
is  checked  and  nothing  checked  twice. 

The  advantage  of  this  plan  of  checking  is  that  you  have  gone  over  every  step  of  your 
work  in  posting  and  addition  in  an  order  reverse  from  that  in  which  the  work  was  done. 
If  the  checking  has  been  carefully  done,  you  have  discovered  the  mistake. 

When  you  have  secured  a  trial  balance,  hand  in  your  work.  Do  not  attempt  to  close 
any  accounts  at  this  time. 

Teachers'  Note. — Additional  practice  in  journalizing  is  provided  for  in  the  exercises  on  accounts. 
If  it  seems  desirable,  require  the  students  to  journalize  the  transactions  in  these  exercises,  using  loose 
sheets  of  journal  paper  for  the  purpose.  The  additional  practice  thus  secured  will  be  of  great  value  to 
them,  as  they  cannot  be  too  well  grounded  in  journalizing.  Even  if  their  work  in  journalizing  has  been 
well  done  thus  far,  they  have  probably  had  to  sUidy  it  very  carefully  and  work  slowly.  They  ought  to 
be  able,  before  proceeding  further,  to  journalize  rapidly  unthoiU  error.  When  journalizing  transactions 
has  become  almost  second  nature  to  them,  their  minds  can  be  free  to  grasp  the  meaning  and  use  of  the 
business  papers  which  will  be  introduced  in'Chapter  II,  and  free  to  grapple  with  the  more  difficult  prob- 
lems in  accounting  which  they  will  encounter. 

Review  Qttestions.  1.  What  is  bookkeeping?  2.  What  is  its  purpose?  3.  What  is  meant  by 
the  "condition"  of  the  business,  and  how  is  it  shown?  4.  The  "progress"  of  the  business?  5.  Name 
6  accounts  which  exhibit  condition.  6.  Name  4  which  exhibit  progress.  7.  What  is  the  ledger?  8. 
What  is  the  purpose  of  the  cash  account?  9.  The  method  of  debiting  and  crediting  it?  10.  The  result 
shown?  11.  How  is  the  account  closed?  12.  TVTiat  is  a  promissory  note?  13.  Name  the  parties  to 
a  note  and  give  definitions.  14.  What  is  an  endorsement?  15.  What  is  the  purpose  of  an  endorsement 
of  a  note?  16.  Name  the  parties  to  an  endorsement  and  give  definitions.  17.  When  is  a  promissory  note 
a  "note  receivable?"  18.  When  is  it  a  "note  payable?"  19.  Answer  questions  8,  9,  10,  and  11  as  applied 
to  the  notes  receivable  account.  20.  Answer  questions  8,  9,  10,  and  11  as  applied  to  the  notes  payable 
account.  21.  Answer  questions  8,  9,  10,  and  11  as  applied  to  personal  accounts.  22.  What  is  an  inven- 
tory? 23.  Answer  questions  8,  9,  10,  and  11  as  applied  to  the  real  estate  account.  24.  WTiat  is  done 
with  the  two  red  ink  entries  of  an  account  closing  with  an  inventory  and  a  loss  or  gain?  25.  What  is 
merchandise?  26.  Answer  questions  8,  9,  10,  and  11  as  applied  to  the  Mdse  account.  27.  "VVTiat  are 
expenses?  28.  Answer  questions  8,  9,  10,  and  11  as  applied  to  the  expense  account.  29.  What  is 
interest?  30.  Answer  questions  8,  9,  10,  and  11  as  applied  to  the  interest  account,  31.  When  is  an 
inventory  placed  upon  the  debit  side  of  an  account?  Wien  upon  the  credit  side?  32.  Answer  ques- 
tions 8,  9,  10,  and  11  as  applied  to  the  Loss  &  Gain  account.  33.  Answer  questions  8,  9,  10,  and  11  as 
applied  to  the  proprietor's  account.  34.  WTiat  are  books  of  original  entry?  35.  What  are  books  of 
final  entry?  36.  WTiat  are  aiixiliary  books?  37.  What  is  meant  by  "a  business  transaction"?  38. 
What  is  double  entry  bookkeeping?  39.  Give  the  general  rule  for  debiting  and  crediting  accounts.  40. 
What  is  the  journal?  41.  What  is  journalizing?  42.  How  are  debits  and  credits  indicated  in  the  journal? 
43.  When  should  an  address  be  written  in  the  journal?  44.  Why  are  entries  transferred  from  the  journal 
to  the  ledger?  45.  What  is  the  process  of  transferring  entries  from  the  journal  to  the  ledger  called? 
Describe  it.     46.  What  is  the  trial  balance?    47.  How  do  you  proceed  to  find  errors  in  posting? 


CHAPTER  II 


PRACTICAL  OFFICE  WORK  AND   BOOKKEEPING 

THE    STUDENT   AS   BOOKKEEPER 

BUSINESS  FOR  JANUARY,  19— 

January  1,  19 — .  D.  B.  Stewart  has  today  engaged  in  the  flour  and  feed  business  at 
377  Adams  St.,  Chicago,  III.  You  have  been  installed  as  bookkeeper  and  cashier  at  a  salary 
of  $20.00  per  week. 

You  are  bojkkeeper  and  cashier  because  you  are  to  have  charge  not  only  of  the  books, 
but  of  the  cash  as  it  is  received  and  paid  out.  You  are  to  look  to  Mr.  Stewart,  however, 
for  authority  to  pay  out  cash;  and  Mr.  Stewart  will  sign  all  checks. 

Transaction  No.  i 

Mr.  Stewart  hands  you  $10,100.00  in  cash,  which  he  wishes  to  invest  in  the  business- 
The  cash  will  be  found  in  the  envelope  marked  "Currency,"  which  accompanies  your  outfit. 
Take  from  it  one  $100.00  bill  and  a  slip  marked,  "This  slip  represents  $10,000.00  in  cash." 

Bookkeeping.  Journalize  the  transaction  and  make  your  first  journal  entry,  following 
it  by  a  complete  explanation,  as  shown  in  the  illustration. 

Journal  Entry  with  Explanation 


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Note.  In  the  preliminary  chapter  on  accounts  and  journalizing  nothing  was  said  about  the  expla- 
nation. This  explanation  should  follow  every  journal  entry  and  should  always  be  full  and  complete. 
No  fault  of  bookkeepers  causes  greater  confusion  and  more  misunderstandings  than  that  of  making 
journal  explanations  which  are  not  complete  or  are  not  clear.  Leave  nothing  to  the  memory  or  the 
imagination. 

Explanations  should  be  worded  in  every  case  so  as  to  show  our  side  of  the  transaction.  When  we 
buy  Mdse.  of  Smith,  the  explanation  should  read  "Bought."  When  Jones  pays  us,  the  explanation  should 
be  "Received."     And  so  on. 

Erasures  in  the  journal  are  positively  forbidden.  In  the  absence  of  instructions,  apply 
to  your  teacher  in  case  of  an  error.     Strive  not  to  make  errors.     Be  neat  and  orderly  in 

44 


DEPOSITING 


45 


everything  pertaining  to  your  work  and  you  will  thus  greatly  diminish  the  chances  of 
error.  Be  sure  that  you  know  what  is  to  be  debited  and  what  is  to  be  credited  before 
you  make  an  entry.  If  in  doubt,  write  your  entry  out  on  a  separate  slip  of  paper  and 
show  it  to  your  teacher  for  approval  before  writing  it  in  your  journal. 

Filing.  Accompanying  your  outfit  you  will  find  a  filing  device  consisting  of  a  number 
of  sections,  each  marked  to  show  what  it  should  contain.  One  of  these  sections  is  marked 
"Cash  Register."     Place  in  it  the  $10,100.00. 

Legal  point.  The  journal  is  the  only  book  of  original  entry  used  this  month.  It  is  the  book  in 
which  entry  is  made  in  the  first  place — at  the  time  of  the  transaction  in  each  case.  It  is  therefore  the 
only  book  which  will  be  received  in  evidence  in  a  suit  at  law,  because  the  law  refuses  to  accept  books 
in  which  entries  were  made  subsequent  to  the  transactions,  or  books  to  which  transactions  have  been 
transferred,  if  a  book  of  original  entry  can  be  secured.  This,  it  will  be  seen,  furnishes  one  good  reason 
why  erasures  in  the  journal  are  forbidden — an  entry  which  has  been  erased  and  patched  up  would,  of 
course,  not  be  acceptable  as  evidence. 

The  Day  Book.  The  old-fashioned  way  was  to  make  memorandums  of  all  transactions  in  a  "Day 
Book"  in  the  order  of  their  occurrence,  afterwards  making  the  required  entries  in  the  journal  and  other 
books,  from  which  posting  could  be  made  to  the  ledger.  This  necessitated  an  additional  step  in  the 
bookkeeping.  The  explanatory  journal  combines  the  old-fashioned  day  book  and  journal  and  saves 
time.     Some  bookkeepers  still  cling  to  the  day  book. 


Transaction  No.  2 


^ 


Deposited  with  the 

Merchants  Exchange  Bank 


at  Account  of 


January  1.     Mr.  Stewart  has  made  arrangements  to  open  a  checking  account  with  the 
Merchants  Exchange  Bank.     He  instructs  you  to  deposit  $10,000.00. 

Business  point.     It  is  not  prudent  to  keep  a  large  sum  of  money  in  your  cash  register.     The  bank 

is  the  proper  place  to  keep  all  funds  beyond  what 
cash  is  necessary  for  making  change.  Nearly  all 
business  firms  deposit  every  day.  The  bank  becomes 
responsible  for  the  funds  in  its  possession  and  will 
pay  them  out  as  you  order  by  your  checks. 

Procedure.  Fill  out  a  deposit  slip  like  the 
one  here  shown,  a  pad  of  which  has  been 
secured  at  the  bank.  Present  the  slip  and  the 
$10,000.00  to  the  receiving  teller  at  the  bank. 

The  Bank  is  glad  to  furnish  deposit  slips,  check- 
books and  pass-books  to  its  customers  free  of  charge. 
You  will  find  all  these  things  among  the  supplies  fur- 
nished you  with  this  set. 

Filing.  The  deposit  slip  and  the  $10,000.00 
are  to  be  placed  in  the  outgoing  papers  sec- 
tion of  the  file.  Thia  corresponds  to  leaving 
them  at  the  bank. 

Teacher's  Note.  If  your  school  has  no  bank,  ap- 
point some  student  as  banker.  Instructions  given 
in  the  text  will  show  him  how  to  receive  the  deposits, 
and  make  the  pass-book  entries.  Some  teachers  prefer  to  authorize  each  student  to  act  as  his  own 
banker,  but  this  is  confusing  to  the  pupil,  if  not  positively  dangerous.  No  teacher  should  do  this  with- 
out being  extremely  careful  to  impress  upon  the  student  the  fact  that  he  is  not  acting  for  himself,  but 
£or  another,  in  doing  the  work. 


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46 


PRACTICAL  OFFICE  WORK  AND  BOOKKEEPING 


Many  business  houses  make  it  a  rule  to  keep  duplicates  of  all  deposit  slips,  as  these  would  contain 
records  of  detail  which  the  bare  entry  in  the  pass  book  would  not  show.  If  a  depositor  forgets  his 
pass  book,  he  may  secure  a  duplicate  deposit  slip  and  hold  it  until  the  deposit  can  be  entered  in  the 
pass  book. 

Bookkeeping.  No  entry  is  required  in  the  books  for  this  transaction.  Cash  in  the  bank 
is  considered  as  on  hand  just  the  same  as  if  it  were  in  the  cash  register.  In  order  to  know 
the  amount  of  cash  on  hand  at  any  time  it  is  necessary  to  add  the  amount  in  the  bank  to 
the  amount  in  the  cash  drawer.  Just  now,  $10,000.00  is  in  the  bank,  and  $100.00  is  in  the 
cash  drawer,  making  a  total  of  $10,100.00,  as  shown  by  the  cash  account.  Whenever  cash 
is  paid  out  of  the  cash  drawer,  or  drawn  out  of  the  bank  by  check,  cash  is  credited. 

Legal  and  Business  Points.  Banks  are  glad  to  receive  deposits.  The  money  so  deposited  is  used 
by  the  bank  in  its  business,  and  as  an  important  part  of  its  business  is  that  of  making  loans  at  interest, 
it  is  amply  repaid  for  its  trouble  in  receiving  deposits,  caring  for  the  money  and  paying  the  checks, 
by  the  interest  it  is  able  to  earn  on  the  balances  remaining  in  the  bank.  Large  depositors  can 
demand  and  obtain  interest  on  deposits  left  in  the  bank  for  a  considerable  time,  though  most  banks  will 
not  pay  interest  on  accounts  against  which  checks  are  drawn  from  time  to  time.  Mr.  Stewart  is  not 
to  receive  interest,  as  he  plans  to  check  against  his  account. 

Some  banks  in  large  cities  do  not  wish  to  be  bothered  with  small  accounts  and  will  not  accept  them- 

THE   PASS-BOOK 

The  cover  of  the  bank  pass-book  reads: 


^ierchants  Exchange  Bank 

of 

In  account  with 


In  the  first  blank  line  write  the  name  of 
the  city,  —  Chicago.  In  the  second  blank 
line  write  the  name  D.  B.  Stewart.  In  the 
lower  left-hand  corner  of  the  cover  write  your 
name  and  write  the  name  of  your  school  imme- 
diately below  it. 

When  the  receiving  teller  of  the  bank  has 
entered  your  deposit  in  the  pass-book,  it  will 
appear  as  shown  in  the  illustration  below. 


Merchants  Exchange  Bank 

In  Acc't  With  D.  a  5toar/ 


19— 


Jan.  1 


Deposit 


10000 


Note.  The  entry  in  the  pass-book  constitutes  the  bank's  receipt  for  the  money.  The  purpose  of 
the  pass-book  is  to  contain  a  list  of  these  receipts  as  deposits  are  made. 

When  Mr.  Stewart  made  his  arrangements  with  the  bank  he  was  required  to  leave  his 
signature  at  the  bank.     No  other  signature  will  be  honored  on  a  check.     You  are  to  make 
out  the  checks  and  take  them  to  Mr.  Stewart  (represented  by  your  teacher)  for  his  sig 
nature. 

At  the  option  of  the  teacher,  the  student  may  be  allowed  to  sign  the  checks  himself,  thus:  "D.  B. 
Stewart,  by  (student's  name)."  This  will  save  time,  but  is  not  as  good  a  practice.  Most  banks  would 
require  a  written  authorization,  called  Power  of  Attorney,  before  honoring  checks  so  signed.  The  Power 
of  Attorney  gives  the  employee  power,  as  attorney  for  the  employer,  to  do  the  thing  or  things  specified  in  it. 


ISSUING   A    NOTE  47 

THE    CHECK-BOOK    STUB 

You  are  to  keep  a  record  of  transactions  with  the  bank  on  the  check-book  stub. 
Your  first  entry  on  the  check-book  stub  will  be,  "Deposit,  Jan.  1,  19 — ,  $10,000.00/' 
as  shown  in  the  illustration  on  page  42. 

Transaction  No.  3 

January  1.  A  cash  register  has  been  delivered  to-day  by  the  National  Cash  Registey 
Company. 

Mr.  Stewart  has  examined  the  cash  register  and  found  it  to  be  in  perfect  condition, 
and  the  invoice  correct  as  to  amount  and  terms.  He  has  therefore  placed  his  "O.  K." 
upon  the  invoice  in  the  lower  left-hand  corner,  thus:  "0.  K. — D.  B.  S."  He  hands  you 
the  invoice. 

The  invoice  will  be  found  in  the  pad  of  incoming  papers.  It  is  the  first  paper  that  has 
been  received  and  will  be  the  top  paper  in  the  pad  (Incoming  Paper  No.  1).  Detach  the 
invoice  from  the  pad. 

Observe  that  the  terms  on  which  the  cash  register  was  sold  are  "Note  30  days."  You 
will,  therefore,  detach  a  note  from  the  pad  of  blank  notes,  after  filling  it  out  properly, 
and  present  it  for  signature  to  Mr.  Stewart.  Turn  to  page  9  for  instructions  as  to  filling 
out  a  note.  This  one  does  not  bear  interest.  Make  it  payable  at  "my  office."  Mr.  Stewart 
will  sign  the  note.  [Your  teacher  will  sign  Mr.  Stewart's  name  or  authorize  you  to  sign 
"D.  B.  Stewart,  by  (your  initials)."] 

Before  detaching  the  note  from  its  stub,  fill  out  on  the  stub  a  record  showing  the  number 
of  the  note,  to  whom  and  for  what  it  was  issued,  its  date,  the  length  of  time  it  is  to  run, 
the  due  date,  and  the  amount. 

Bookkeeping.  Make  the  journal  entry,  charging  the  amount  to  "Furniture  and  Fix- 
tures." When  you  open  your  ledger,  an  account  will  be  opened  under  this  title,  which  will 
be  debited  with  the  cost  of  all  furniture  and  fixtures. 

Your  explanation  in  the  journal  should  be,  "Bought  of  the  National  Cash  Register  Co. 
on  our  30-day  note,  one  cash  register  No.  350-C.  Their  invoice  No.  235."  This  last  refers 
to  the  invoice  number  which  the  National  Cash  Register  Co.  has  placed  upon  the  bill  in  the 
upper  left-hand  corner. 

Filing.  Pin  or  otherwise  attach  the  note  to  the  invoice,  and  mail  the  two  by  placing 
them  in  the  outgoing  papers  section.  If  you  use  a  pin,  be  sure  that  its  point  is  hidden 
between  the  two  papers,  so  that  it  will  not  prick  the  fingers  of  one  opening  the  envelope. 

^^  Business  Note.     It  is  customary  for  business  houses  to  number  serially  their  invoices  of  goods  sold. 

'  This  is  a  means  of  quickly    identifying  a  bill  and  furnishes  a  convenient  reference.     In  correspondence 

a  bill  is  referred  to  as  "Invoice  No.  — ."     This  fully  describes  the  bill  without  a  long  enumeration  of 

date,  items,  etc.     Mr.  Stewart  expects  you  to  employ  a  similar  system  of  numbering  invoices  when 

goods  are  sold. 

Note.     The  bookkeeping  entry  should  always  be  made  before  the  papers  used  in  the  transaction  are 

filed,  as  the  papers  not  only  contain  the  information  necessary  for  the  entry,  but  serve  as  a  reminder 

that  the  entry  has  not  been  made.     Always  make  the  journal  entry  at  once,  if  possible. 

\  Business  Point.     Do  not  underestimate  the  importance  of  filing  all  papers  promptly  and  systemat- 

\ically.     The  difference  between  a  good  bookkeeper  and  an  incompetent  one  often  lies  in  the  ability  of 

tfie  former  to  find  quickly  any  document  he  wants. 


48  PRACTICAL  OFFICE  WORK  AND   BOOKKEEPING 

Transaction  No.  4 

January  1,  Mr.  Stewart  hands  you  an  invoice  of  furniture  and  fixtures  which  he  has 
to-day  received  and  O.  K.'d  (Incoming  Paper  No.  2  in  the  pad  of  incoming  papers). 

Observe  that  the  terms  of  this  bill  are  "On  account."  You  will,  therefore,  make  a 
journal  entry  crediting  The  Macey  Co.,  82  Wabash  Ave.,  Chicago,  III,  and  file  the  invoice 
in  the  section  marked,  "Invoices  Payable."  In  your  journal  entry  refer  to  the  invoice 
as  "Their  No.  2457." 

Transaction  No.  5 

January  1.  Mr.  Stewart  asks  you  to  make  out  a  check  for  $125.00,  for  the  rent  of  the 
store  for  January.     The  check  is  payable  to  J.  B.  Olmstead,  the  owner  of  the  building. 

Make  out  the  check,  all  except  the  signature,  as  shown  in  the  illustration,  and  hand  it  to 
D.  B.  Stewart  (represented  by  your  teacher)  for  his  signature.  (Your  teacher  will  give 
instructions  as  to  how  this  signature  is  to  be  secured.) 

Form  of  Check 


rof^'JA  Aj(  yi-<U^.^i7^Z<fy^' 


'^'ll^22..£.y:^:^L^i.^tL^^3^^ 


A.lsi::i 


^/t^aX-a^^'^-^.^^^^^^A-^ 


Explanation.  The  above  check  is  No.  1.  Succeeding  checks  will  be  numbered  in  the 
order  in  which  they  are  drawn.     The  next  will  be  No.  2,  etc. 

The  amount  is  written  both  in  figures  and  words,  as  a  safeguard  against  mistakes.  Note 
that  the  three  words  in  "One  Hundred  Twenty-five"  are  each  capitalized.  "Twenty-five" 
is  a  compound  word.  Note  that  the  "&"  is  placed  between  the  dollars  and  the  cents.  It 
must  always  be  placed  there.  "No/100"  means  "no  cents."  "Twenty  cents"  would  be 
written  '"20/100." 

Be  careful  to  begin  the  written  amount  at  the  extreme  left  of  the  blank  line,  and  to  fill 
up  all  unused  spaces  after  the  amount  in  writing,  the  amount  in  figures,  and  the  name. 
This  may  be  done  with  ruled  lines,  or  with  wavy  lines  with  the  pen,  as  in  the  illustration. 
Thus  you  may  prevent  tampering  with  the  check. 

Legal  Point.  In  case  there  is  a  difference  between  the  amount  written  in  words  and  the  amount 
expressed  in  figures,  the  written  amount  will  be  considered  correct. 


THE  LEASE 


49 


Deposit,  Jan.  /,  ig- 


No.- 


Date- 


Jan. 


In  favor  of 

J .  B.  OlmsUad 


.19— 


On  what  account 
Rent  for  Jan. 


12^.00 


No. 


Date- 


Jan.  / 


-19— 


In  favor  of 
Pillsbury  Washburn  Co. 


On  what  account 
Invoice  #  2346 


1127.50 


The  Check-book  Stub.     The  balance  of  Mr.  Stewart's  account  with  the  bank  should 
always  be  exhibited  on  the  check-book  stub.     This  is  done  by  adding  the  amount  of  each 

deposit  to  the  previous  balance,  and  subtract- 
ing the  amount  of  each  check.  The  balance 
before  Check  No.  1  was  drawn  was  $10,- 
000.00.  From  this  the  amount  of  Check 
No.  1  is  subtracted.  Write  in  the  proper 
blank  spaces  on  the  stub  the  number  and 
date  of  the  check,  the  name  of  the  person 
to  whom  it  was  issued,  the  purpose  for 
which  it  was  issued,  and  the  amount.  Carry 
the  amount  out  into  the  main  column  and 
subtract  it  from  the  balance.  This  should 
be  done  before  the  check  is  torn  out  of  the 
book.  The  illustration  shows  the  stub  for 
the  first  two  checks. 

The  balance  at  the  bottom  of  the  first 
stub  should  be  written  at  the  top  of  the  next 
stub,  the  balance  at  the  bottom  of  the  second 
stub  carried  to  the  top  of  the  third,  and 
so  on. 

To  tear  off  check  No.  1,  hold  a  sharp  rule 
firmly  against  the  paper  at  the  line  show- 
ing where  to  tear,  and  tear  quickly  with  an 
upward  motion.  Learn  to  do  this  neatly 
before  attempting  to  tear  the  check  off. 

The  Lease.    The  agreement  between  Mr. 

Stewart,  the  renter,  and  Mr.  Olmstead,  the 

landlord,    was  put  in  written  form.     This 

written  agreement  is  called  a  lease.     Mr. 


125 


9S75 


mj 


S747 


50 


50 


Stewart  hands  you  the  lease,  and  asks  you  to  file  it.     He  requests  you  to  read  it  carefully 
before  you  file  it,  so  that  you  will  know  what  the  agreement  is,  and  to  "brief"  it. 

You  will  find  the  lease  among  the  miscellaneous  papers  accompanying  your  outfit. 

Questions  on  the  Lease:  ^ 

Who  is  the  party  of  the  first  part? 
Who  is  the  party  of  the  second  part? 
What  is  the  length  of  the  lease? 
When  and  in  what  amounts  is  the  rent  to  be  paid? 

If  Mr.  Stewart  should  vacate  the  premises  at  the  end  of  the  sixth  month,  would  he  be  required  to 
pay  rent  for  the  remaining  six  months? 

If  Mr.  Olmstead  should  in  the  above  case  rent  the  property  to  another  party  after  it  had  been  vacant 
thirty  days,  for  how  much  could  he  hold  Mr.  Stewart? 

May  Mr.  Stewart  rent  office  room  to  another  party? 

Mr.  Stewart  allowed  heavy  trucks  to  be  dragged  across  the  floor  and  damaged  it.  Who  is  re- 
sponsible according  to  the  terms  of  the  lease? 


50 


PRACTICAL  OFFICE   WORK  AND   BOOKKEEPING 


At  the  end  of   the  year  the  wall  paper  is  soiled  and  the  painting  worn  off  of  the  wood  work  in 
spots.     Can  Mr.  Stewart  be  compelled  to  repaper  and  repaint  the  interior? 


rvE>  A.SE> 


From. 


J.  B.  Olmstead 
To 


D.  B.  Stewart 


January  i 


-19- 


To- 


December  J T 


-19- 


"Briefing"  the  Lease.  By  this  is 
meant  writing  on  the  back  of  the  paper 
in  a  concise,  brief  form,  the  nature  of  its 
contents.  On  the  back  of  the  lease  you 
will  find  a  printed  form  which  is  to  be 
filled  in  with  this  information.  When 
you  have  filled  it  in,  it  will  read  as  shown 
in  the  illustration. 

Fold  the  lease  so  that  the  briefing  on 
the  back  will  be  on  the  outside  when  it 
is  folded.  File  the  lease  in  the  section 
marked  "Miscellaneous  Incoming  Papers." 

Business  Point.  It  is  usual  and  best  to 
have  the  lease  drawn  up  in  proper  form  before 
the  building  is  occupied.  But  in  this  case  Mr. 
Stewart  took  possession  first,  and  the  lease 
followed  as  a  matter  of  form.  A  verbal  agreement  without  the  formality  of  a  written  lease  would  be 
binding  in  most  states  for  any  length  of  time  less  than  one  year.  It  is  better  in  any  case,  however,  to 
have  a  written  lease,  thus  avoiding  misunderstandings  and  disputes. 

Bookkeeping.  In  journalizing  the  entry,  be  sure  that  your  explanation  shows  that 
the  payment  was  for  the  January  rent.  A  sufficient  explanation  would  be,  "Paid  rent 
for  Jan.,  19—,  by  Ck.  No.  1." 

Filing.  Deliver  the  check  to  Mr.  Olmstead  by  filing  it  in  the  section  marked 
"Outgoing  Papers."  Mr.  Olmstead  gives  you  a  receipt  (Paper  No.  3  in  the  pad  of  in- 
coming papers).  Examine  the  receipt  to  see  that  it  is  properly  made  out  and  file  it  in 
the  section  marked  "Receipts." 

The  National  Cash  Register  Co.  has  returned  the  invoice  paid  today,  receipted.  That 
is,  with  the  words,  "Paid  by  note  Jan.  1,  19 — ,  National  Cash  Register  Co.,  by  A.  B." 
written  on  the  bottom  of  the  bill.  You  may  take  this  paper  from  the  outgoing  papers 
file,  have  the  notation  made  on  the  bottom  (by  your  teacher  or  someone  authorized  by 
him  to  act  for  the  National  Cash  Register  Co.),  and  file  it  in  the  section  marked  "Receipts." 
Leave  the  note  in  the  outgoing  papers  section. 


Transaction  No.  6 

January  1.  Mr.  Stewart  hands  you  an  invoice  for  goods  received  today  from  the 
Pillsbury- Washburn  Flour  Mills  Co.,  135  Adams  St.,  City.  (This  is  Paper  No.  4  in  the  pad 
of  incoming  papers.)  Mr.  Stewart  has  O.K.'d  the  invoice.  He  instructs  you  to  look  for 
this  O.  K.  on  every  bill  before  making  any  payment  or  any  entry  on  your  books.  Verify 
the  multiplications  and  addition  of  the  bill. 


MAKING  OUT  AN  INVOICE 


51 


The  terms  of  the  invoice  are  "Net  Cash."  This  means  you  are  to  pay  the  bill  at  once 
in  cash  without  deduction.  Write  out  a  check  for  the  amount,  and  hand  it  to  Mr.  Stewart 
(your  teacher)  for  his  signature,  or  sign  it  yourself,  as  your  teacher  may  direct. 

Bookkeeping.  You  need  not  itemize  the  bill  in  the  journal  explanation,  because 
the  invoice  itself  contains  a  detailed  list  of  the  items  purchased.  Pillsbury- Washburn 
Co.'s  number  (No.  2346)  will  be  found  in  the  upper  right-hand  corner  of  the  bill,  and 
your  journal  explanation  should  refer  to  their  number  and  date,  thus:  "Their  No.  2346, 
dated  Jan.  1."  A  sufficient  explanation  of  this  transaction  would  be:  "Bought  of  Pills- 
bury-Washburn  Flour  Mills  Co.,  135  Adams  St.,  City,  their  invoice  No.  2346,  dated 
Jan.  1,  19 — .     Paid  net  cash  by  our  check  No.  2." 

Filing.  Pin  or  otherwise  attach  the  check  to  the  invoice  and  mail  the  two  to  the 
Pillsbury- Washburn  Co.,  by  placing  them  with  the  outgoing  papers. 

Business  Point.  The  Pillsbury-Washbum  Co.'s  mills  are  located  at  Minneapolis,  Minn.,  but  Mr. 
Stewart  transacts  all  his  business  with  them  through  their  local  office.  It  is  customary  for  large  houses 
to  have  local  offices  in  all  important  cities.  These  offices  usually  have  on  hand  a  stock  of  merchandise. 
The  local  office  is  in  a  better  position  to  get  the  business  than  the  main  office,  can  fill  orders  with  less 
delay,  and  can  make  collections  more  readily. 

Transaction  No.  7 

January  2.  A  sale  is  made  to  the  Boston  Bakery  Co.,  1220  S.  Clark  St.,  on  account, 
of  10  brl.  Best  Baker's  Patent  Flour,  at  $5.75. 

Billing.  Detach  one  invoice  from  the  pad  of  blank  invoices,  and  fill  it  out  as  shown 
in  the  following  illustration: 


An  bUlt  du«  In  lltw  Tork  or  CIiic<<o  Bxckaat*.     0«im>  for  Shorttg*  oa  thii  bin  mutt  b«  madt  on  receipt  of  ioo<li. 


No — /^ CHICAGO, 


f!f.,f^y,  7-. 


.19_ZZL 


TO  D.  B.  STEWART,  ^^ 

DEALER    IN 

FLOUR  and  FEED 


377  ADAMS  STREET 


/  n 


-^^  /^.^/^J^^^^Cj^7j^^:^i^^y    .-f^r   .ry 


^S7j\ 


52  PRACTICAL   OFFICE  WORK  AND   BOOKKEEPING 

Business  Point.  The  bill  is  to  accompany  the  merchandise.  A  bill  or  invoice,  containing  an  item- 
ized list  of  goods  t;old,  should  always  be  made  out  for  goods  sold  on  account,  and  handed  or  mailed  to 
the  customer  at  the  time  of  the  sale.  Some  houses  even  make  out  bills  for  cash  sales,  especially  when 
the  goods  are  to  be  delivered. 

Note  that  the  model  invoice  is  numbered  "1."  The  next  invoice  you  make  out  will  be 
No.  2,  and  so  on. 

Bookkeeping.  In  the  explanation  for  the  journal  entry,  itemize  the  goods  sold.  Write 
the  address  of  The  Boston  Bakery  Co.  in  the  journal  explanation.  This  address  must 
appear  in  the  ledger  when  you  open  the  account  later. 

Filing.     Mail  the  bill  by  placing  it  in  the  outgoing  papers  section. 

The  Pillsbury- Washburn  Co.  has  returned  the  invoice  which  we  paid  on  January  1, 
marked  "Received  payment,  Jan.  1,  19 — .  Pillsbury- Washburn  Flour  Mills  Co.,  per  A. 
B."  Take  it  out  of  the  outgoing  papers  section,  have  it  receipted,  as  above,  for  the  Pills- 
bury-Washburn  Co.,  and  file  it  in  the  section  marked  "Receipts." 

Transaction  No.  8 

January  3.     We  sell  to  H.  E.  Brown,  for  cash,  5  brl.  Pillsbury's  Best  flour  at  $6.80. 

The  cash  will  be  found  in  the  "Currency"  envelope.  No  bill  will  be  made  out,  because 
the  sale  was  made  for  cash  to  a  person  who  has  no  account  on  our  books. 

Bookkeeping.  In  the  journal  entry,  make  note  of  the  quantity  and  price  of  the 
goods  sold. 

Filing.     Place  the  cash  in  the  "Cash  Register." 

Transaction  No.  g 

January  3.  Mr.  Stewart  has  bought  1,000  bushels  of  oats  from  the  American  Milling 
Co.,  179  La  Salle  St.  He  now  hands  you  the  invoice,  which  he  has  O.K.'d,  asking  you  to 
pay  it  by  check.     (Incoming  pfiper  No.  5). 

The  check  will  be  your  Check  No.  3. 

Bookkeeping.  As  this  is  the  first  entry  on  page  2  of  the  journal,  write  the  date  out 
in  full  at  the  top  of  the  page.  Number  the  pages  of  the  journal,  writing  the  numbers  on 
the  line  opposite  the  date  and  near  the  outside  edge  of  the  page. 

Filing.     Mail  bill  and  clieck  by  placing  them  in  the  outgoing  papers  section  of  the  file. 

Legal  and  Business  Points.  Checks  are  orders  on  the  bank  to  pay  a  given  sum  of  money  to  the 
person  or  firm  named  therein.  The  persori  drawing  the  check  must,  of  course,  have  funds  on  deposit 
at  the  bank.  The  bank  will  pay  the  check  and  charge  the  amount  against  the  account  of  the  person 
drawing. 

The  person  signing  the  check  is  called  the  "drawer"  (in  this  case,  D.  B.  Stewart).  The  person  or 
firm  in  whose  favor  the  check  is  drawn  (in  this  case,  the  American  Milling  Co.)  is  the  "payee."  The 
bank  is  called  the  "drawee." 

Transaction  No.  lo 

January  3.  A  sale  is  made  to  the  Austin  Livery  Co.,  Austin,  111.,  on  account,  of  100 
bu.  Standard  oats  at  65  cents. 


TRANSACTIONS   CONTINUED  63 

Make  out  an  invoice  (our  No.  2).  As  a  matter  of  your  own  convenience,  you  may  now 
number  your  blank  invoices  up  to  No.  23.  Then  you  will  not  have  to  look  up  the  number 
of  the  last  invoice  whenever  you  wish  to  number  a  new  one. 

Bookkeeping.  Be  sure  to  write  the  address  of  the  Austin  Livery  Co.  in  the  journal 
entry.     (See  form  on  page  29.) 

Filing.     File  the  invoice  in  the  outgoing  papers  section. 

Transaction  No.  ii  *  * 

January  3.  This  being  Saturday  night,  Mr.  Stewart  pays  you  your  salary  for  three  days 
in  cash,  $10.00.  Make  a  journal  entry.  Take  the  cash  out  of  the  cash  register.  Place 
it  in  the  outgoing  papers  section. 

Transaction  No.  12 

January  5.     We  are  presented  by  A.  C.  McClurg  &  Co.  with  a  bill  for  office  books  and 
stationery  bought  of  them  by  Mr.  Stewart  and  delivered  to-day. 
Pay  this  bill  in  cash,  taking  the  cash  from  the  "Cash  Register." 

McClurg  «fe  Co.'s  bill  will  be  found  in  the  pad  of  incoming  papers  (No.  6).  It  is  marked  "Paid  Jan. 
6,  19—     A.  C.  McClurg  &  Co.,  by  W.  L.  R." 

Bookkeeping.     Debit  the  expense  account. 

Filing.  File  the  bill  with  the  receipts.  Place  the  outgoing  cash  in  the  outgoing  pa- 
pers section  of  the  file. 

The  American  Milling  Co.  has  receipted  and  returned  the  invoice  for  which  we  sent 
a  check  Saturday.  Take  the  invoice  out  of  the  outgoing  papers  section,  have  the  receipt 
written  at  the  bottom  for  the  American  Milling  Co.,  and  file  the  paper  in  the  section  marked 
"Receipts." 

Transaction  No.  13 

January  7.  We  have  sold  to-day  for  cash  to  D.  R.  Francis,  3940  Lake  St.,  25  brl. 
Lincoln  flour  at  $5.25.     Mr.  Francis  asks  for  a  receipted  bill. 

Make  out  a  bill,  terms,  "Net  cash."     Write  a  receipt  at  the  bottom  of  the  bill,  dating  it. 

The  cash  received  is  in  the  form  of  a  check,  which  you  will  find  in  the  pad  of  incoming 
papers  (No.  7).  Examine  it  carefully  to  see  that  it  is  made  out  to  D.  B.  Stewart,  that  the 
date  and  amount  are  correct,  and  that  it  is  properly  signed. 

Filing.     File  the  check  in  the  "Cash  Register." 

Note.  Checks  received  are  always  regarded  as  cash,  because  they  are  orders  on  a  bank  for  money 
which  can  be  obtained  at  once. 

Transaction  No.  14 

January  7.  Mr.  Stewart  instructs  you  to  deposit  the  check  just  received  and  $100.00 
in  cash.  See  transaction  No  2  for  the  proper  procedure  in  making  a  deposit.  List  the 
amount  of  currency  and  the  amount  of  the  check  separately.  Rule  a  line  at  the  bottom 
of  the  deposit  slip  and  write  the  total.  On  the  horizontal  line  opposite  the  word  "checks," 
place  the  initials  of  the  drawer  of  the  check,  "D.  R.  F." 

Business  and  Legal  Point.  Checks  should  be  deposited,  if  possible,  within  twenty-four  hours  of 
the  time  they  are  received.     If  checks  are  not  presented  for  payment  (or  deposited,  which  amounts  to 


54 


PRACTICAL  OFFICE  WORK  AND  BOOKKEEPING 


tho  same  thing)  within  a  reasonable  time  after  they  are  received,  the  holder  loses  in  case  of  the  failure 
of  the  bank — and  the  courts  have  held  that  a  "reasonable  time"  in  which  the  payee  must  act  is  twenty- 
four  hours,  except  in  unusual  cases.  When  the  bank  drawn  upon  is  at  a  distance,  reasonable  time  must 
be  allowed  for  the  check  to  be  forwarded. 

Furthermore,  failure  to  present  a  check  will  cause  the  holder  great  inconvenience  in  case  the  maker 
should  draw  out  his  funds  from  the  bank  while  the  check  was  being  held  by  the  payee.  The  bank  would 
return  the  check  marked  "No  funds"  or  "Insufficient  funds."  The  holder  would  then  be  compelled 
to  look  to  the  maker  of  the  check  to  redeem  it. 

Deposit  checks  promptly  and  be  on  the  safe  side. 

*  Endorsement.  Before  depositing,  the  check  should  be  endorsed.  That  is,  D.  B.  Stew- 
art's name  should  be  signed  on  the  back  of  the  check,  as  shown  in  the  illustration.  This 
transfers  the  ownership  of  the  check  from  Mr.  Stewart  to  the  bank,  and  also  constitutes 
Mr.  Stewart's  receipt  for  the  money.  In  case  the  check  should  prove  to  be  "no  good"  the 
bank  could  require  Mr.  Stewart  to  take  it  back.  Checks  should  always  be  endorsed  when 
transferred,  whether  to  a  bank  or  a  person  or  firm.  This  check  reads  "Pay  to  the  order 
of  D.  B.  Stewart."  Mr.  Stewart's  endorsement  is  his  "order"  for  the  payment  of  the 
check. 


^^e4^.^^zz. 


'^.'^^^^-^^^''7^^^    ,^'?  ^le^^yt<i/ 


TJ^^^.^^^^^ 


All  commercial  papers  should  be  endorsed  when  transferred  from  one  party  to  another.  Following 
are  several  forms  of  endorsement: 

Endorsement  in  Blank.  This  consists  merely  of  the  name  of  the  party  transferring  the  paper,  as 
shown  in  the  illustration. 

Its  effect  is  to  order  the  paper  to  be  paid  to  bearer.  The  endorser  becomes  responsible  for  it  to  the 
party  to  whom  he  transfers  it;   that  is,  he  agrees  to  redeem  it  if  the  maker  does  not. 

Note.  It  is  permissible  for  one  receiving  a  check  endorsed  in  blank,  to  fill  in  above  the  endorsement 
the  words  "  Pay  to  the  order  of  (endorsee's  name)"  so  that  it  becomes  an  endorsement  in  full.  This  is 
a  wise  precaution  if  one  expects  to  hold  the  check  for  some  time,  or  if  there  is  danger  of  losing  it,  as 
the  paper  is  then  not  payable  to  bearer. 


ENDORSEMENT  '  55 

Endorsement  in  Full.  This  consists  of  the  name  of  the  endorser  and  instructions  as  to  whom  to 
pay,  thus: 

Pay  to  the  order  of  the  Merchants'  Exchange  Bank. 

D.  B.  Stewart. 
Its  effect  is  to  order  that  the  paper  be  paid  to  the  Merchant's  Exchange  Bank  or  some  one  the  bank 
may  specify  by  a  second  endorsement.     Mr.  Stewart  agrees  to  pay  it  if  the  maker  does  not. 

Restrictive  Endorsement.  This  consists  of  the  name  of  the  endorser,  preceded  by  instructions 
as  to  whom  to  pay,  and  the  word  "only"  or  "for  collection"  or  "for  deposit"  or  "for  my  use"  or 
similar  words,  thus: 

Pay  to  E.  D.  Smith  only. 

D.  B.  Stewart. 
This  does  not  transfer  the  paper  to  E.  D.  Smith,  but  indicates  that  Smith  is  acting  as   Stewart's 
agent.     Smith  has  no  power  to  transfer  the  paper  further,  but  merely  to  collect  it  for  Stewart.     Stewart 
agrees  to  redeem  the  paper  if  the  maker  does  not. 

Restrictive  endorsements  of  checks  are  not  encouraged  by  banks. 

Conditional  Endorsement.     This  is  an  endorsement  coupled  with  a  condition,  thus: 

Pay  to  E.  D.  Smith  on  January  1,  provided  he  be  engaged  in  the  practice  of 

law  at  that  time. 

D.  B.  Stewart. 

The  validity  of  such  an  endorsement  depends  upon  the  fulfillment  of  the  condition.  This  is  an 
unusual  form. 

Endorsement  "Without  Recourse."     This  endorsement  reads: 
Pay  to  E.  D.  Smith  without  recourse  to  me. 

D.  B.  Stewart. 

It  effects  the  transfer  of  the  paper  from  Stewart  to  Smith,  but  repudiates  Stewart's  obligation  to 
pay  if  the  maker  does  not.     It  is  unsafe  to  accept  paper  endorsed  "without  recourse." 

Business  Point.  If  the  name  of  the  payee  be  misspelled  in  the  body  of  a  check,  he  should  spell  his 
name  in  the  same  way  in  his  endorsement,  but  should  also  sign  his  name  again  underneath  that,  spelling 
it  correctly. 

Business  Point.  In  case  there  are  a  number  of  checks  deposited,  it  is  customary  to  list  them  in  the 
column  underneath  the  word  "Checks,"  placing  the  total  only  in  the  main  column  opposite  the  word 
"Checks." 

Endorse  in  blank  the  check  just  received,  and  make  the  deposit.  The  bank  clerk  will 
enter  the  date  and  amount  of  the  deposit  immediately  below  the  last  entry  in  the  pass- 
book.    Do  not  forget  to  add  the  deposit  in  your  check  book  stub. 

Mr.  Stewart  requests  that  in  future  you  attend  to  the  depositing.  Deposit  all  checks 
promptly,  and  do  not  keep  on  hand  more  than  a  small  amount  of  cash.  Make  it  a  rule 
never  to  keep  a  sum  in  excess  of  $100.00  in  the  cash  register  over  night. 

Transaction  No.  15 

January  9.  We  receive  from  the  Eckhart  &  Swan  Milling  Co.,  377  Carroll  Ave.,  an 
invoice  of  merchandise  bought  on  account.     (Incoming  Paper  No.  8). 

Filing.     File  the  invoice  in  the  section  marked  "Invoices  Payable." 

Transaction  No.  16 

January  10.     We  sell  to  the  Austin  Livery  Co.,  on  account,  100  bu.  ear  corn  at  57^0. 
Follow  the  instructions  given  in  Transaction  No.  7. 


56  PRACTICAL   OFFICE  WORK  AND   BOOKKEEPING 

Transaction  No.  17 

January  10.     We  sell  to  The  Boston  Bakery  Co.,  on  account,  20  brl.  Best  Baker's  Patent 
flour  at  $6.20;  50  bu.  Standard  oats  at  76^;  and     500  bu.  ear  corn  at  68^. 
Follow  instructions  given  for  Transaction  No.  7. 

Transaction  No.  18 

January  10.     Your  salary  is  paid  in  cash,  $20.00. 
Follow  the  instructions  given  on  Jan.  3. 

POSTING 

Mr.  Stewart  now  suggests  that  you  post  the  transactions  from  the  journal  to  the  ledger. 
The  transactions  appear  in  the  journal  in  the  order  of  their  occurrence,  but  they  must  be 
arranged  in  the  ledger  in  the  proper  accounts.  It  is  not  desirable  that  the  posting  be 
deferred.  The  longer  you  delay  the  work  of  posting,  the  further  behind  you  will  get. 
Besides,  if  someone  should  desire  to  settle  his  account,  or  for  any  other  reason  it  should 
be  necessary  to  find  the  balance  of  any  account,  it  would  be  inconvenient  to  have  to  trace 
through  the  journal  hunting  up  items.  There  are  many  reasons  why  the  posting  should  be 
kept  up  to  date. 

Opening  the  Ledger.  You  will  now  open  accounts  in  the  ledger,  opening  them  in  the 
order  in  which  they  are  given  in  the  list  which  follows.  Write  your  ledger  headings  in  a 
plain,  bold  hand.  Do  not  abbreviate  except  for  initials,  for  the  word  "Co."  and  for  the 
sign  "&."     Addresses  must  be  written  for  all  personal  accounts. 

Allow  for  each  account  one  line  for  the  name  of  the  account,  one  line  for  the  ruling, 
and  for  the  entries  the  number  of  lines  indicated  in  the  following  list: 

Page  1:  D.  B.  Stewart,  9  lines;  Expense,  17.  Page  2:  Furniture  and  Fixtures,  9;  Merchandise,  24. 
Page  3:  Interest,  9;  Loss  and  Gain,  10.  Page  4:  Cash,  27;  Notes  Receivable,  6.  Page  5:  The  Boston 
Bakery  Co.,  11;  Austin  Livery  Co.,  9;  H.  N.  Alkire,  11.  Page  6:  E.  C.  Judson,  10;  J.  T.  Hooper,  6; 
Notes  Payable,  11.  Page  7:  Eckhart  &  Swan  Milling  Co.,  10;  The  Macey  Co.,  4;  Pillsbury-Washburn 
Flour  Mills  Co.,  4. 

Indexing  the  Ledger.  Number  the  ledger  pages  and  proceed  to  list  the  ledger  accounts 
alphabetically  in  the  index,  which  precedes  the  first  page  of  the  D.  B,  Stewart's  ledger. 
Write  the  heading  "  Index  to  D.  B.  Stewart's  Ledger,"  at  the  top  of  the  page.  The 
page  is  divided  into  twelve  sections.  These  should  be  headed  as  follows:  First  column, 
A,  B,C  &  D,  E  second  column,  F  &  G,  H,  I,  J&  K;  third  column,  L,  M,  N  &  O,  P  to  Z. 
First  write  D.  B.  Stewart's  name  in  the  space  under  S,  thus:  Stewart,  D.  B,  Write  figure 
1  (the  ledger  page)  in  the  narrow  column  at  the  left.  Then  index  Expense  under  E,  writing 
the  ledger  page  (1)  in  the  narrow  column.  Furniture  and  Fixtures  is  indexed  under  F, 
and  Merchandise  under  M,  but  in  each  case  the  ledger  page  2  is  used  instead  of  1.  In  this 
manner  index  all  accounts  each  under  its  proper  letter,  the  ledger  page  being  shown  in 
each  case. 

The  Boston  Bakery  Co.  is  indexed  under  B.  and  is  written  "Boston  Bakery  Co.,  The."  Notes  Pay- 
able and  Notes  Receivable  are  indexed  under  N.  The  Macey  Co.  is  indexed  under  M.  Eckhart  & 
Swan  Milling  Co.,  under  E. 


students'  reports  67 

Posting.  Post  the  transactions  from  the  journal  to  the  ledger.  Refer  to  page  33  for 
definite  instructions  for  posting.  Begin  with  the  first  transaction  in  the  journal  and  post 
the  transactions  in  order.  In  posting  each  transaction,  post  first  the  debit  or  debits  and 
then  the  credit  or  credits.  Use  as  your  explanation  for  each  entry  in  the  ledger  the  name 
of  the  account  or  accounts  affected  on  the  other  side  in  the  same  transaction. 

Write  the  number  of  the  journal  page  in  the  folio  column  of  the  ledger  and  the  number 
of  the  ledger  page  in  the  L.  F.  column  of  the  journal  at  the  instant  of  posting  the  entry. 
Then  there  will  be  no  confusion  in  case  you  are  interrupted  before  the  posting  is  finished. 

Student's  Weekly  Reports 

Student's  Report  No.  i.  Accompanying  your  outfit  is  a  pad  of  reports,  the  purpose 
of  which  is  to  show  that  your  files  have  been  properly  kept  and  to  show  certain  other  facts 
your  teacher  should  know  at  this  time.  These  reports  are  to  be  made  out  at  the  end  of 
each  business  week. 

Write  your  name  at  the  top  of  the  report.  Fill  in  the  spaces  for  the  Report  Number 
(1),  the  date  (Jan.  10, 19 — ),  and  the  fact  that  the  report  is  taken  at  the  end  of  Transaction 
No.  18. 

How  to  Fill  Out  the  Report 

Cash.  Opposite  the  words  "Cash  Dr."  write  the  total  of  cash  received,  which  you  will 
ascertain  by  adding  the  debit  side  of  the  cash  account.  Place  below  it  the  amount  of  cash 
paid  out.     The  difference  is  the  balance  on  hand. 

The  Cash  Proof.  This  is  the  test  of  the  cash  balance.  Count  the  cash  in  the  cash  reg- 
ister and  write  the  amount  in  the  first  blank  space.  Add  to  this  the  bank  balance,  as  shown 
by  the  check-book  stub.  The  sum  of  these  two  items  is  the  balance  on  hand,  and  must 
agree  with  the  balance  on  hand  as  ascertained  from  the  cash  account. 

As  there  is  no  cash  in  the  cash  register  at  this  time,  you  need  not  fill  out  the  Cash 
Proof  on  Report  No.  1. 

You  will  do  nothing  with  the  Bank  Proof  at  this  time. 

Papers  Issued.     Under  this  head  include  in  each  report  all  papers  issued  since  January  1. 

The  number  of  checks  issued  will  be  shown  by  the  number  on  the  check-book  stub. 
Write  the  total  of  checks  issued  in  the  "Amount"  column. 

The  number  of  notes  issued  will  be  found  by  counting  the  stubs  of  the  blank-book  for 
notes.     Add  the  amounts  of  the  notes  and  write  the  total  in  the  "Amount"  column. 

The  deposit  slips  will  all  be  in  the  outgoing  papers  section.  Count  them  and  record 
the  number  made  out.  Put  their  total  amount  in  the  "Amount"  column.  The  difference 
between  this  amount  and  the  amount  of  total  checks  issued  should  agree  with  the  bank 
balance  as  shown  by  the  check-book  stub. 

Invoices  issued  will  all  be  found  in  the  outgoing  papers  section.  Some  of  these  will  be 
receipted  by  us  and  some  will  not.  Count  them  all.  Compute  the  amount.  This  amount 
differs  from  the  total  sales  to  date  by  $34.00,  as  no  invoice  was  made  out  for  the  cash  sale 
($34.00)  made  on  Jan.  3. 

The  receipts  issued  may  be  determined  from  the  stub  of  the  receipt-book,  on  which  you 
have  made  proper  memorandums.     No  form  receipts  have  been  issued  as  yet. 

No  drafts  have  been  drawn  as  yet. 

Condition  of  Files.  This  part  of  your  report  will  show  whether  your  files  have  been 
properly  kept. 


58  PRACTICAL  OFFICE  WORK  AND  BOOKKEEPING 

Unpaid  bills  should  all  be  in  the  file  marked  "Invoices  Payable."  Give  the  number  of 
them  and  the  amount. 

Notes  Receivable  are  all  kept  in  the  cash  register.     None  have  been  received  as  yet. 

Receipts  received  by  us  should  all  be  in  the  section  marked  "Receipts."  They  are  of 
four  kinds:  (a)  Simple  receipt  forms,  filled  out  and  signed  by  others;  (b)  Canceled  checks, 
which  are  equivalent  to  receipts  from  the  endorsers;  (c)  Canceled  notes,  which  are  equiva- 
lent to  receipts;  (d)  Invoices  and  bills  paid  by  us,  which  were  marked  "Paid"  by  others 
when  we  paid  them. 

It  is  of  the  utmost  importance  that  you  fill  out  these  reports  properly.  Your  teacher 
checks  your  work  each  week  from  these  reports,  and  a  failure  on  your  part  to  make  them 
out  properly  will  result  in  poor  marks  for  you. 

Hand  in  your  report  to  your  teacher. 

Business  Point.  It  is  customary  in  business  to  "prove  the  cash"  (take  a  cash  proof)  every  day 
or  oftener.  Banks  usually  prove  the  cash  as  often  during  the  day  as  business  will  permit.  The  longer 
an  error  in  cash  goes  undiscovered,  the  harder  it  is  to  find  out  what  the  mistake  was. 

Transaction  No.  19 

January  12.     We  sell  for  cash  5  brl.  Pillsbury's  Best  flour  at  $6.80. 
No  bill  will  be  made  out  for  this  transaction.     The  cash  may  be  taken  from  the  out- 
going papers  section,  and  placed  in  the  cash  register. 

Transaction  No.  20 

January  13.  Mr.  Stewart  hands  you  an  invoice  for  500  bu.  No.  2  spring  wheat,  bought 
of  Kemper  Bros.  Co.,  663  N.  Halsted  St.,  on  our  note  payable  fifteen  days  after  date,  with- 
out interest.     (The  invoice  is  Incoming  Paper  No.  9.) 

Detach  a  note  from  the  pad  of  blank  notes  and  fill  it  out,  all  except  the  signature.  Make 
it  payable  at  Mr.  Stewart's  office.     Secure  the  signature  in  the  usual  way. 

Business  Point.  The  note  is  payable  "fifteen  days  after  date."  The  time  when  payable  could 
have  been  specified  in  some  other  way,  as  "Twenty  days  after  Jan.  8,"  "On  Jan.  28,"  etc.  But  the  above 
wording  is  usual. 

Note.  D.  B.  Stewart  has  not  in  any  sense  discharged  his  debt  by  issuing  the  note.  He  has,  if  any- 
thing, bound  himself  even  more  positively,  for  in  the  note  he  specifies  in  writing  a  place  and  a  date  on 
which  he  will  pay.  He  now  owes  Kemper  Bros.  Co.  "on  his  note";  if  no  note  had  been  issued,  he 
would  owe  them  "on  account." 

The  date  on  which  the  note  falls  due  is  called  the  date  of  "maturity." 

Bookkeeping.  State  in  your  journal  explanation  the  length  of  time  for  which  the 
note  runs. 

Filing.  Deliver  the  note  by  placing  it  in  the  outgoing  papers  section.  Kemper  Bros. 
Co.  receipt  the  invoice.  (Have  the  receipt  written  for  them:  "Paid  by  note  1/13/19 — . 
Kemper  Bros.  Co.,  by ").     File  the  receipted  bill  with  the  receipts. 

Transaction  No.  21 

January  15.     We  sell  to  H.  N.  Alkire,  3760  N.  Halsted  St.,  on  account,  100  bu.  No.  2 
spring  wheat  at  $1.15,  and  50  brl.  Pillsbury's  Best  flour  at  $6.90. 
Follow  the  instructions  for  -Transaction  No.  7. 


QUESTIONS   ON  THE  REPORT  59 

Transaction  No.  22 

January  15.  Pajnuent  is  made  by  the  Austin  Livery  Co.  for  Mdse.  bought  of  us  on 
Jan.  3.     This  bill  is  for  $65.00.     They  pay  cash,  $15.00;  and  a  30-day  note  for  $50.00. 

A  $10.00  bill  and  a  $5.00  bill  will  be  found  in  the  envelope  marked  "Currency." 

The  note  will  be  found  in  the  incoming' papers  pad  (No.  10). 

Take  the  invoice  from  the  outgoing  papers  section  and  receipt  it  thus:   "Paid  1/15/19 — . 

Cash,  $15.00.     30-day  note,  $50.00.     D.  B.  Stewart,  by ."     Return  the  receipted 

invoice  to  the  outgoing  papers  file. 

Bookkeeping.  The  explanation  in  the  journal  should  show  when  the  note  falls  due, 
and  the  rate  of  interest  it  bears. 

Filing.  Place  the  cash  and  note  in  the  cash  register,  first  examining  the  note  carefully 
to  see  that  it  is  correctly  made  out. 

Transaction  Wo.  23 

January  17.  We  sell  to  The  Boston  Bakery  Co.,  on  account,  5  brl.  Lincoln  flour  at 
$5.15. 

Transaction  No.  24 

January  17.     Your  salary  is  paid  in  cash,  as  on  Jan.  10. 

Take  the  cash  from  the  cash  register  and  place  it  in  the  outgoing  papers  section  of 
the  file. 

Posting.  Mr.  Stewart  suggests  that  you  now  post  to  the  ledger  all  transactions  which 
have  not  yet  been  posted  from  the  journal. 

From  the  L.  F.  column  in  your  journal  you  can  determine  what  transactions  have  been 
posted,  as  a  page  number  has  been  entered  in  this  column  opposite  every  posted  transaction. 
Continue  the  posting  from  the  point  where  you  left  off.  In  making  the  entries  in  the  ledger, 
leave  no  blank  spaces;  write  each  new  debit  item  immediately  below  the  last. debit  item 
posted  in  the  account  affected,  and  each  new  credit  item  immediately  below  the  last  credit 
item  posted  to  that  account.  Do  not  forget  to  write  the  journal  page  in  the  ledger  and 
the  ledger  page  in  the  journal,  as  each  item  is  posted. 

Student's  Report  No.  2.  Make  out  a  student's  report,  following  the  instructions  given 
on  page  50  for  Student's  Report  No.  1.  The  report  on  "Papers  Issued"  will  include  all 
papers  issued  since  Jan.  1.  The  report  on  "Condition  of  Files"  will  show  the  condition  of 
the  files  as  they  now  stand. 

Questions: 

Does  the  cash  balance,  as  shown  by  your  cash  proof,  equal  the  balance  on  hand  as  shown  by  your 
Cash  account? 

Does  the  difference  between  the  amount  of  deposits  and  the  amount  of  checks  drawn  equal  the  bank 
balance  as  shown  by  the  check-book  stub? 

Does  the  difference  between  the  notes  issued  and  the  canceled  notes,  as  shown  by  the  report,  equal 
the  balance  of  the  notes  payable  account  as  shown  by  the  ledger? 

Does  the  sum  of  the  canceled  checks,  if  any,  in  the  receipt  file,  and  the  checks  still  in  your  outgoing 
papers  file,  equal  the  total  of  checks  issued,  as  shown  by  your  report? 


60  *  PRACTICAL  OFFICE  WORK  AND  BOOKKEEPING 

Remember  page  62  and  refer  to  the  foregoing  questions  whenever  you  prepare  a  Student's 
Report.  They  will  greatly  assist  you  in  keeping  your  files  properly.  Do  not  pass  to  the  work  of 
the  next  week  until  the  report  has  been  approved  by  your  teacher. 

The  Trial  Balance  (by  Differences).  Add  the  ledger  accounts,  placing  small 
lead-pencil  footings  underneath  the  columns  added.  In  each  account  write  the  difference 
between  the  two  footings  just  to  the  left  of.the  larger  footing,  as  illustrated  on  page  14 
for  personal  accounts.  Prepare  your  trial  balance,  dating  it  Jan.  17,  19 — ,  using  differ- 
ences only. 

Taking  a  trial  balance  by  differences  is  in  fact  nothing  but  the  omission  from  the  trial  balance  of  equal 
amounts  on  both  sides  of  the  ledger,  the  amount  omitted  in  each  account  being  the  amount  of  the  smaller 
side  of  that  account.  Deducting  this  amount  from  the  smaller  side  leaves  0.  Deducting  it  from  the 
larger  side  leaves  the  difference  between  the  two  sides.  In  future,  all  trial  balances  will  be  by  differences 
only,  as  this  is  the  customary  form.  (When  the  adding  machine  is  used,  trial  balances  of  full  footings 
are  often  taken.) 

Note.  Before  writing  the  lead  pencil  figures  in  the  ledger,  sharpen  your  lead  pencil  to  a  fine  point, 
and  be  sure  to  make  small,  neat  figures  just  beneath  the  last  item  in  the  column  and  close  to  it  so  as 
not  to  interfere  with  the  item  which  will  later  be  written  on  the  next  line.  It  is  well  to  use  a  medium 
or  hard  lead  pencil  for  this  purpose.  Be  careful  in  making  your  rigures.  Many  mistakes  originate  in 
carelessly  made  figures,  and  these  are  harder  to  discover  than  any  other  mistakes. 

Checking.  If  a  mistake  has  been  made,  proceed  at  once  to  discover  it  by  checking, 
as  described  on  page  36.  Many  bookkeepers  check  the  posting  whether  the  trial  balance 
comes  out  all  right  or  not,  as  there  are  some  mistakes  which  may  exist  without  throwing 
the  ledger  out  of  balance,  as,  for  instance,  posting  to  a  wrong  account,  or  transposing  a 
debit  and  credit.     Careful  checking  will  reveal  these. 

If  a  bookkeeper  purposes  to  check  his  posting  whether  or  not  his  ledger  is  in  balance 
(as  shown  by  his  trial  balance),  then  it  is  well  that  the  checking  be  done  before  the  trial 
balance  is  attempted.  In  this  case  the  bookkeeper  will  be  spared  the  annoyance  and  dis- 
couragement of  failing  to  get  a  balance. 

Making  Corrections.  When  an  error  is  discovered,  ask  your  teacher  how  to  correct  it. 
Later  on  you  will  be  taught  how  to  correct  the  different  kinds  of  errors,  but  for  the  present 
you  will  consult  with  your  teacher  on  these  matters.  Do  not  make  erasures  or  interline- 
ations, or  rule  out  figures,  unless  your  teacher  instructs  you  to  do  so. 

Close  no  accounts  at  this  time. 

Transaction  No.  25 
January  20.     We  sell  to  E.  C.  Judson,  36  S.  Water  St.,  Chicago,  on  account,  200  bu. 
Standard  oats  at  65  cents. 

Transaction  No.  26 

January  21.  We  sell  for  cash  to  E.  C.  Judson,  36  S.  Water  St.,  100  bu.  No.  2  spring 
wheat  at  $1.12^  and  4  bu.  ear  corn  at  62 i^.  Mr.  Judson  demands  a  receipt.  You  will  there- 
fore make  out  an  invoice  and  receipt  it. 

Take  a  $100.00  bill  from  the  currency  envelope  and  a  $20.00  bill  from  the  outgoing 
papers  section.     Return  to  the  outgoing  papers  section  $5.00  change  from  the  cash  register. 

Bookkeeping.  Make  two  journal  entries,  one  charging  E.  C.  Judson  for  the  goods 
purchased,  and  the  other  crediting  him  for  the  payment. 

Business  Note.  It  is  customary  in  business  to  keep  a  record  in  the  ledger  of  all  transactions  with 
persons  having  accounts  with  us,  whether  such  transactions  are  for  cash  or  on  account.  The  purpose 
of  this  is  that  the  ledger  may  exhibit  a  complete  history  of  all  transactions  with  those  persons.     Mr. 


TRANSACTIONS   CONTINUED  61 

Judson  is  a  regular  customer  of  Mr.  Stewart's,  and  Stewart  wishes  this  transaction  to  show  on  Judson's 
account,  even  though  it  was  a  cash  transaction.     The  above  plan  provides  for  this. 

Filing.  Place  the  cash  received  in  the  cash  register.  Place  the  receipted  invoice 
with  the  outgoing  papers. 

Transaction  No.  27 

January  21.  Deposit  $100.00  in  the  bank.  (See  instructions  given  for  Transaction 
No.  2.) 

Transaction  No.  28 

January  22.  We  sell  to  H.  N.  Alkire,  on  account,  5  bu.  Standard  oats  at  65^,  10  bu. 
ear  corn  at  60  <t,  and  5  bu.  No.  2  spring  wheat  at  $1.15. 

Transaction  No.  29 

January  24.  Mr.  Stewart  hands  you  an  invoice  for  merchandise  bought  of  the  Eckhart 
&  Swan  Milling  Co.  on  account.     (Incoming  Paper  No,  11). 

Transaction  No.  30 

January  24.     Your  salary  is  paid  as  on  Jan.  10.     See  instruction  on  that  date. 

Posting.  Mr.  Stewart  again  suggests  that  all  posting  should  be  done  up  to  date.  Post 
all  transactions  that  have  not  yet  been  posted,  but  do  not  take  a  trial  balance  nor  close 
any  accounts. 

Student's  Report  No.  3  should  be  made  out  at  this  time. 

When  you  have  made  out  your  report,  turn  to  the  questions  on  page  52,  and  answer 
them  satisfactorily  to  yourself  before  handing  the  report  to  your  teacher. 

Mr.  Stewart  does  not  expect  to  prompt  you  every  Saturday  night  to  post  your  books. 
Understand   that  you  are  to   post  your  books  every  Saturday  night  until  differently 
instructed.     Make  out  a  report  at  the  end  of  each  business  week. 
y 

Transaction  No.  31 

January  27.  Mr.  Stewart  instructs  you  to  pay  the  Eckhart  &  Swan  Milling  Co.'s  bill 
of  Jan.  9  by  giving  them  our  10-day  note  for  $300.00  bearing  6%  interest  and  our  check 
for  $180.00. 

See  Transaction  No.  3  for  instructions  as  to  issuing  our  note.  Make  the  note  payable 
here.  See  Transaction  No.  5  for  instructions  as  to  drawing  a  check.  Do  not  forget  the 
record  on  the  check-book  stub. 

Bookkeeping.  State  in  your  journal  explanation  that  this  is  in  payment  of  their 
bill  of  Jan.  9. 

Filing.  Take  the  invoice  from  the  section  for  "Invoices  Payable,"  have  it  receipted 
by  the  Eckhart  &  Swan  Milling  Co.,  and  file  it  with  the  receipts.  DeUver  the  check  and 
note  by  placing  them  in  the  outgoing  papers  section. 

Transaction  No.  32 

January  27.  W^e  sell  to  H.  N.  Alkire,  on  account,  50  brl.  Lincoln  fiour  at  $5.40  and 
50  bu.  barley  screenings  at  76^. 


62  PRACTICAL  OFFICE  WORK  AND   BOOKKEEPING 

Transaction  No.  33 

January  28.     Mr.  Stewart  asks  if  we  do  not  owe  a  note  which  falls  due  about  this  time. 
Look  in  the  outgoing  papers  section  and  take  out  a  note  which  is  due  today. 
Mr.  Stewart  instructs  you  to  pay  this  note  at  once  by  check.     Write  out  a  check  for 
the  amount,  which  Mr.  Stewart  will  sign. 

Filing.     Have  Kemper  Bros.  Co.  cancel  the  note  by  writing  across  the  face  of  the 

paper,  in  red  ink,  "Paid  Jan.  28,  Kemper  Bros.  Co.,  by  ■ "      File  the  canceled  note 

with  the  receipts.     Deliver  the  check  by  filing  it  with  the  outgoing  papers. 

Business  Point.  Canceled  notes,  receipted  invoices,  and  paid  checks  are  all  receipts  and  should  be 
kept  with  the  receipts.  You  will  not  get  back  any  paid  checks  until  the  bank  returns  them  all  at  the 
end  of  the  month  with  its  monthly  statement. 

Transaction  No.  34 

January  29.  We  sell  to  H.  K.  Walton,  Oak  Park,  111,,  50  bu.  barley  screenings  at 
72^,  receiving  in  payment  his  check.     (Incoming  Paper  No.  12). 

Make  no  bill  for  this  transaction,  as  the  sale  is  for  cash  to  a  person  who  has  no  account 
with  us.     File  the  cash. 

Transaction  No.  35 

•     January  30.     The  Boston  Bakery  Co.,  has  paid  $20.00  on  account  in  cash. 
Take  the  cash  from  the  outgoing  papers  section  and  file  it  in  the  cash  register. 
Give  them  a  receipt  for  $20.00  "on  account."     Make  a  proper  record  of  this  receipt 
on  the  stub  of  the  receipt  book.     See  Incoming  Paper  No.  3  for  form  of  receipt. 

Transaction  No.  36 

January  30.  Deposit  the  check  last  received  and  $20.00  in  cash.  The  check  should 
be  endorsed  in  blank  before  depositing. 

Transaction  No.  37 

January  31.     Your  salary  is  paid  in  cash. 

Transaction  No.  38 

January  31.  Mr.  Stewart's  note  in  favor  of  the  National  Cash  Register  Co.  falls  due 
today.     He  instructs  you  to  pay  it  by  check  and  have  the  note  canceled. 

Take  the  note  from  the  outgoing  papers  section. 

Write  out  a  check  for  the  proper  amount  and  secure  Mr.  Stewart's  signature. 

Do  not  forget  to  make  the  proper  entries  on  the  check-book  stub  before  detaching  the 
check.  Have  the  note  canceled  by  the  National  Cash  Register  Co.  Place  the  canceled 
note  with  the  receipts. 

Posting 

Post  the  remainder  of  the  transactions  for  January.  The  last  transaction  posted  was 
No.  30.  In  posting,  leave  no  blank  spaces  in  the  ledger,  on  either  side.  Do  not  skip  a 
single  fine  in  the  ledger  just  because  it  has  lead-pencil  figures  above  it-    If  you  have  followed 


STATEMENTS  63 

instructions  closely  these  figures  are  small  and  written  close  beneath  the  last  item  posted 
before  Jan.  19,  so  they  will  not  interfere  with  the  new  entries. 

Trial  Balance 

Take  a  trial  balance,  dating  it  January  31.  The  footings  for  this  trial  balance  should 
include  all  transactions  from  the  beginning.  You  may  add  all  entries  in  the  ledger  col- 
umns, ignoring  the  lead-pencil  footings  which  you  placed  in  the  ledger  at  the  time  of 
taking  the  last  trial  balance,  on  Jan.  17;  or  you  may  simply  add  up  to  and  including  these 
footings.    In  the  trial  balance  appear  differences  only. 

Inventories        t."^ 

At  the  end  of  the  month  Mr.  Stewart  values  the  property  and  Mdse.  on  hand  as  fol- 
lows: 

Furniture  and  Fixtures,  $    385.00 
Mdse.,  1,066.63 

Teacher's  Note.  There  are  two  small  interest  inventories,  one  a  resource  and  the  other  a  liability, 
which  Mr.  Stewart  omits  from  this  Ust,  as  they  practically  cancel  each  other. 

STATEMENTS 

One  month's  business  has  now  been  transacted  and  Mr.  Stewart  desires  to  know  what 
the  gain  or  loss  has  been  during  the  month  and  how  the  house  stands  financially.  He  asks 
you  to  prepare,  from  the  ledger  accounts  and  the  inventories,  statements  showing  these 
things. 

The  progress  and  condition  of  the  business  may  be  shown  by  means  of  statements. 
These  statements  may  be  prepared  at  periodical  intervals,  usually  monthly,  semi-annu- 
ually,  or  annually. 

By  the  progress  of  the  business  is  meant  its  net  gain  or  net  loss.  The  statement 
showing  the  progress,  or  profitableness,  of  the  business  is  called  the  Loss  and  Gain  State- 
ment. The  items  of  which  this  statement  consists  are  taken  from  the  accounts  show- 
ing loss  or  gain. 

The  condition  of  the  business  is  shown  by  a  list  of  its  assets  and  liabilities,  called  the 
Financial  Statement.  The  items  of  which  this  statement  consists  are  taken  from  the 
financial  accounts  and  from  the  inventories. 

Before  you  can  prepare  a  Loss  and  Gain  Statement  or  a  Financial  Statement,  you 
must  understand  the  following: 

Classification  of  Accounts 

Accounts  in  the  ledger  are  of  two  classes,  namely;  Loss  or  Gain  accounts,  and  Financial 
accounts. 

A  Loss  or  Gain  account  is  one  which  exhibits  as  a  result  either  a  loss  or  a  gain.  If  the 
debit  side  be  the  larger,  a  loss  is  shown;  if  the  credit  side  be  the  larger,  a  gain  is  shown. 
Of  this  class  of  accounts  are  Mdse.,  Real  Estate,  Interest,  Expense,  Loss  and  Gain,  etc. 

A  Financial  account  is  one  which  exhibits  as  a  result  either  an  asset  or  a  liability. 
Assets,  or  resources,  are  property  of  any  kind.     Liabilities  are  debts.     If  the  debit  side 


64 


PRACTICAL   OFFICE   WORK   AND   BOOKKEEPING 


Inventories  of  property  on  hand  are  assets.     These  inventories  are  not  the  results  of  accounts,  how- 
ever, but  are  ascertained  by  an  actual  count  and  valuation  of  the  goods. 

of  a  financial  account  be  larger,  it  exhibits  an  asset;  if  the  credit  side  be  the  larger,  a 
liability  is  shown.  Of  this  class  of  accounts  are  Cash,  Personal  Accounts,  Notes  Receiv- 
able, and  Notes  Payable. 


Refer  to  the  first  chapter  of  this  book,  in  which  the  accounts  are  each  discussed  separately, 
pare  the  result  shown  in  each  case  with  that  shown  in  the  following  table: 


Account 
Cash 

Notes  Receivable 
Notes  Payable 
Personal  Accounts 
Real  Estate 
Mdse. 
Expense 
Interest 
Loss  &  Gain 
Proprietor 


Result 
Asset 
Asset 
Liability 

Asset  or  Liability 
Loss  or  Gain 
Loss  or  Gain 
Loss 

Loss  or  Gain 
Loss  or  Gain 
Amount  of  Investment 


Classification 
Financial 
Financial 
Financial 
Financial 
Loss  or  Gain 
Loss  or  Gain 
Loss  or  Gain 
Loss  or  Gain 
Loss  or  Gain 
Financial 


Corn- 


Questions  : 

May  the  cash  account  ever  show  a  liability?     Why? 

Why  is  it  not  possible  to  say  whether  the  result  of  the  real  estate  account  will  be  a  loss  or  whether 
it  will  be  a  gain? 

Why  does  the  notes  receivable  account  never  show  a  liability? 

Why  does  the  notes  payable  account  never  exhibit  an  asset? 

When  does  a  personal  account  show  an  asset?     When  a  liability? 

W^hy  does  the  expense  account  always  show  loss? 

Which  side  of  the  interest  account  will  usually  be  the  larger  in  case  of  a  business  run  on  borrowed 
money? 


LOSS  AND  GAIN  STATEMENT  PROBLEMS 

1.  E.  W.  Cameron's  ledger  showed  total  gains  for  the  month  of  April,  1913,  to  be  $852.67,  and 
total  losses  for  the  same  period  amounting  to  $623.59.  What  was  his  net  gain  or  loss  for  April?  If 
his  investment  on  April  1  was  $11,274.65,  what  was  his  investment  on  April  30? 

2.  H.  R.  Ward's  ledger  shows  for  the  month  of  May,  1913,  the  following  gains  and  losses:  Gains, 
merchandise,  $293.74,  interest,  $4.76;  losses,  furniture  and  fixtures,  $17.50,  real  estate,  $20.00,  expenses, 
$262.75.  What  was  the  amount  of  his  net  gain  or  loss  for  the  month?  If  his  investment  on  May  1 
was  $9487.56,  what  was  his  investment  on  May  31? 

3.  From  the  following  facts,  taken  from  E.  N.  Miner's  ledger  and  inventories,  determine  the  amount 
of  his  net  gain  or  loss  for  the  month  of  June,  1913:  The  inventory  of  merchandise  on  June,  1913,  was 
$7346.92;  merchandise  purchases  during  June  amounted  to  $526.79;  merchandise  sales  during  June 
amounted  to  $827.33;  inventory  of  merchandise  June  30,  $7457.82.  Fixtures,  which  were  valued  at 
$729.30  on  June  1,  were  valued  at  $710.20  on  June  30.  Expenses  for  June  were  $227.36.  No  othe; 
losses  or  gains  are  shown.  If  his  investment  on  June  1  was  $10,006.72,  what  was  his  investment  on 
June  30? 

4.  State  in  writing  how  to  find  the  net  gain  or  loss  for  a  given  period  if  the  amounts  of  the  separate 
gains  and  losses  be  known.  State  how  the  investment  on  a  given  date  is  determined  if  the  following 
facts  be  known:  (a)  The  investment  at  some  previous  date,  (b)  The  gain  since  that  previous  date  if 
allowed  to  remain  in  the  business,  or  the  loss  since  that  previous  date  if  there  was  a  loss. 


THE    LOSS    AND    GAIN    STATEMENT 
THE  LOSS  AND  GAIN  STATEMENT 


65 


The  Loss  and  Gain  Statement  consists  of  a  list  of  the  separate  losses  and  gains.  The 
difference  between  the  total  gains  and  the  total  losses  will  be  the  net  gain  of  the  business 
since  January  1. 

A  loss  and  gain  statement  ordinarily  shows  the  net  amount  of  gain  or  loss  between  the  time  it  was 
taken  and  the  last  time  the  ledger  was  "closed."  But  in  this  case  it  shows  the  loss  or  gain  since  the 
beginning,  Jan.  1,  as  the  books  have  never  been  closed.  You  will  learn  later  of  the  process  of  closing  the 
ledger.    This  is  usually  done  every  time  the  loss  and  gain  statement  is  taken,  though  not  necessarily  so. 


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66  PRACTICAL    OFFICE    WORK    AND    BOOKKEEPING 

On  page  65  is  an  outline  of  Mr.  Stewart's  loss  and  gain  statement.  The  amounts  are 
to  be  ascertained  by  you  from  the  trial  balance  and  inventories. 

Explanation:  The  gains  are  to  be  listed  first. 

The  first  loss  or  gain  account  listed  in  the  trial  balance  is  the  expense  account.  But  as 
this  account  exhibits  only  debit  items  it  is  apparent  that  it  is  a  loss.  We  will  therefore 
pass  it  for  the  present. 

The  second  loss  or  gain  account  listed  in  the  trial  balance  is  the  furniture  and  fixtures 
account.  An  inspection  shows  that  as  the  cost  of  furniture  and  fixtures  is  greater  than  the 
inventory,  this  account  exhibits  a  loss.     We  will  therefore  pass  it  for  the  present. 

The  next  loss  or  gain  account  in  the  trial  balance  is  Mdse.  You  cannot  readily  deter- 
mine by  inspection  whether  this  account  shows  a  loss  or  a  gain.  You  will  therefore 
figure  it  but  before  writing  it  in  the  statement.  The  total  cost  is  $***.**,  the  debit  foot- 
ing of  the  account.  The  value  of  unsold  Mdse.  is  the  inventory.  The  difference  between 
these  two  is  $***.**,  the  cost  of  the  goods  sold.  The  difference  between  the  total  sales 
(the  credit  side  of  the  account)  and  the  cost  of  the  goods  sold,  as  just  ascertained,  is 
$***,**,  a  gain.  (Had  the  cost  of  the  goods  sold  been  in  excess  of  the  sales,  a  loss  would 
have  been  shown.) 

The  Mdse.  account  is  therefore  the  first  and  only  account  showing  a  gain.  Write  the 
amount  of  the  gain  in  the  left-hand  money  column,  after  showing  your  computations  in 
the  explanatory  column.  Rule  a  single  line  and  carry  the  same  amount  out  into  the  sec- 
ond column  as  the  total  gain.     Write  the  number  of  the  ledger  page  in  the  folio  column. 

Leave  three  blank  lines. 

Write  the  heading  "Losses,"  and  list  the  losses.  These  are  exhibited  by  the  expense 
account  and  the  furniture  and  fixtures  account. 

Subtract  the  total  loss  from  the  total  gain.  The  result  will  be  the  net  gain.  Rule 
up  the  statement. 

FINANCIAL  STATEMENT  PROBLEMS 

1.  On  Jan.  31,  1913,  O.  E.  Miller  had  cash  $560.75,  merchandise  worth  $3246.96,  and  furniture 
and  fixtures  valued  at  $750.00.  G.  V.  Bunker  owed  him  $120.00  and  he  held  H.  W.  Ryerson's  note  for 
$100.00  on  which  $1.50  interest  had  accrued.  If  the  foregoing  were  all  of  O.  E.  Miller's  assets  and  he 
owed  nothing,  what  was  he  worth  at  this  time? 

2.  J.  E.  McBurney's  ledger  and  inventories  showed  that  his  assets  and  debts  on  Feb.  28,  1913, 
were  as  follows:  Cash  on  hand,  $728.49;  real  estate  owned  by  him,  $6500.00;  furniture  and  fixtures, 
$875.00;  stock  of  goods,  $7256.42;  notes  in  his  favor  held  by  him,'$520.00;  and  the  following  amounts 
due  him  from  others:  $52.60,  $73.86,  $27.89,  $62.50,  $23.13.  On  the  same  date  there  was  outstanding 
against  him  a  note  in  favor  of  the  Continental  National  Bank,  $5000.00;  and  he  owed  others  on  account 
the  following  amounts:    $120.60,   $234.61,   $50.65,   $1247.80.     What   was  he  worth  on  Feb.  28? 

3.  On  Mar.  31,  1913,  W.  E.  Bradner  had  cash  on  hand,  $623.50;  furniture  and  fixtures,  $720.00; 
merchandise,  $3752.60;  J.  E.  Smith's  note  for  $100.00  with  $1.50  interest  accrued;  and  an  account 
against  Wm.  Beye,  $225.52.  He  owed  the  First  National  Bank  on  his  note,  $3500.00  and  interest  accrued 
amounting  to  $62.50;  and  he  owed  other  creditors  the  following  amounts:  $1250.60,  $623.75,  $745.83, 
$924.60,  $847.26,  $1324.75.     What  was  the  condition  of  Mr.  Bradner's  business  on  Mar.  Si?  ; 

4.  J.  L.  Bowen's  ledger  showed  the  following  condition  on  April  30,  1913:  Cash  Dr.  total,  $2349.62; 
Cash  Cr.  total,  $647.28;  Notes  Rec.  Dr.,  $1547.60,  Cr.  $1292.75;  balances  against  customers,  $72.46, 
$72.59,  $83.64,  $120.36,  and  $73.62;  Notes  Pay.  Dr.,  $780.69,  Cr.,  $925.79;  and  balances  in  favor  of 
creditors,  $126.40,  $236.87,  $52.76,  and  $83.47.  His  inventories  on  April  30  were  as  follows:  Furniture 
and  fixtures,  $723.64;  merchandise,  $6724.50.  If  there  were  no  other  assets  or  liabilities,  how  much  wag 
J.  L.   Bowen  worth  on  April  30? 


THE    FINANCIAL    STATEMENT  67 

5.  E.  J.  Roberts  invested  S10,000.00  in  business  on  July  1,  1913.  On  July  31  he  had  cash  $892.50, 
furniture  worth  $950.00,  merchandise  valued  at  $8252.69,  and  the  following  amounts  due  from  cus- 
tomers: $125.36,  $127.89,  $139.43,  $82.75,  $63.72.  On  the  same  date  he  owed  a  note  for  $150.00  on 
which  interest  had  accrued  amounting  to  $4.62,  and  his  creditors  had  accounts  against  him  as  follows: 
$124.50,  $67.25,  $52.70.  If  there  were  no  other  assets  or  habilities,  what  was  the  amount  of  E.  J.  Rob- 
erts' investment  on  July  31?     What  was  his  gain  for  July? 

6.  E.  J.  Roberts'  gains  during  July  were  as  follows:  Merchandise,  $577.26;  interest,  $2.37.  His 
losses  were:  On  furniture  and  fixtures,  $12.70;  for  expenses,  $331.66.  What  was  his  net  gain  for  July? 
If  his  investment  on  July  31  was  as  determined  in  the  preceding  problem,  what  was  the  amount  of  his 
original  investment  on  July  1? 

7.  D.  H.  Evert  had  $12,562.50  invested  in  business  on  Jan.  1,  1913.  On  December  31,  1913,  he 
found  that  his  cash,  property,  and  accounts  receivable  from  others  amounted  to  $19,624.72,  while  his 
debts  amounted  to  $4782.31.  His  expenses  and  other  losses  during  1913  had  been  $3256.95.  If  his 
only  source  of  profit  was  his  merchandise,  determine  from  the  known  facts,  what  must  have  been  the 
gross  amount  of  his  merchandise  gain  fOT  1913. 

8.  State  in  writing  how  to  find  the  present  worth  of  a  business  if  the  amounts  of  the  separate  assets 
and  liabihties  be  known.  How  would  you  find  the  loss  or  gain  for  a  given  period  if  the  investment  at 
the  beginning  of  the  period  and  the  investment  at  the  end  of  the  period  were  known? 

Determine  which  of  the  accounts  used  in  Mr.  Stewart's  ledger  are  financial  accounts.; 
These  are  to  be  used  in  preparing  the  financial  statement.  ' 

The  assets  are  listed  first.     The  items  are  written  in  the  left-hand  column,  and  their 
total  placed  in  the  right-hand  column.     The  liabilities  are  then  listed  in  the  same  way. 
The  total  liabilities  are  subtracted  from  the  total  assets.     The  result  is  the  net  capital,  or 
worth  of  the  business  at  the  time  the  statement  is  prepared. 
The  Financial  Statement  Analyzed 

The  Financial  Statement  consists  of  a  list  of  the  assets  and  liabilities  of  the  business, 
prepared  for  the  purpose  of  showing  the  net  capital,  or  the  worth  of  the  business,  at  the 
time  it  is  taken.     It  should  include  all  inventories  and  all  financial  accounts. 

Following  is  an  outline  of  Mr.  Stewart's  financial  statement.  You  may  now  refer  to 
your  trial  balance  of  January  31  and  prepare  a  financial  statement,  using  a  sheet  of  journal 
paper.  In  form  your  statement  will  be  like  the  model  shown.  The  amounts  must  be 
supplied  by  you  after  reference  to  your  trial  balance  and  inventories. 

Explanation:  Write  the  heading,   "Financial   Statement,   January  31,    19 — ." 
On  the  first  line  below  the  double  red  line  write  the  word  "Assets,"  and  proceed  to  list 
the  assets,  writing  the  separate  items  in  the  left-hand  money  column  and  placing  the  total 
in  the  right-hand  money  column,  with  the  explanation  "Total  Assets." 

The  first  two  assets  are  inventories.  The  proper  amounts  are  given  at  the  end  of  the 
transactions  for  January.     You  must  use  the  figures  there  given. 

Refer  to  your  trial  balance.  The  first  account  named  is  the  Proprietor's  account. 
Pass  this  account  for  the  present.  The  second,  third,  and  fourth  accounts  named  in  the 
trial  balance  are  loss  or  gain  accounts,  and  these  will  not  be  used  in  taking  the  financial 
statement.     Pass  them  over  for  the  present. 

The  next  account  listed  in  the  trial  balance  is  Cash.  This  account  exhibits  an  asset, 
which  is  the  balance  of  cash  on  hand,  or  the  difference  between  the  debit  and  credit  sides 
of  this  account.  Place  the  amount  of  this  balance  in  the  left-hand  money  column,  under- 
neath the  Mdse.  inventory.     Place  the  ledger  folio  (4)  in  the  L.  F.  column  at  the  left. 


68 


PRACTICAL  OFFICE  WORK  AND  BOOKKEEPING 


The  next  account  listed  in  the  trial  balance  is  the  notes  receivable  account.  This  is 
an  asset  account.  Place  the  amount  of  the  asset  in  the  left-hand  money  column.  Write 
the  ledger  page  in  the  L.  F.  column;  do  this  for  each  account  listed. 

The  next  account  in  the  trial  balance  is  the  account  with  The  Boston  Bakery  Co.,  a 
personal  account.     Personal  accounts  may  be  either  assets  or  liabilities.     As  the  debit 


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The  above  is  one  of  several  forms  of  statement.  Some  bookkeepers  prefer  to  list  the  assets  on  a  left- 
hand  page  and  the  liabihties  on  the  opposite  or  right-hand  page.  .  Again,  some  bookkeepers  prefer  to 
write  the  capital  as  the  last  item  among  the  liabilities,  so  that  the  total  of  liabilities  including  capital  is 
shown  as  exactly  equal  to  the  total  of  assets.     The  form  shown,  however,  is  more  widely  used. 


PROVING    THE    STATEMENTS  69 

side  of  this  account  is  the  larger,  it  is  apparent  that  the  difiference  between  the  two  sides 
is  an  asset.     Place  it  in  the  list  of  assets. 

The  Austin  Livery  Co.'s  account,  H.  N.  Alkire's  account,  and  E.  C.  Judson's  account 
exhibit  assets.     List  the  amounts  with  other  assets. 

Complete  the  examination  of  the  trial  balance.  Do  any  of  the  remaining  accounts 
exhibit  assets? 

If  not,  proceed  to  list  the  liabilities.  Leave  three  blank  lines  and  write  the  heading, 
"Liabilities." 

Passing  the  Proprietor's  account,  the  accounts  showing  loss  or  gain,  and  the  accounts 
already  listed  as  assets,  the  first  account  you  come  to  is  the  notes  payable  account.  This 
is  a  financial  account.  Its  credit  side  is  the  larger.  It  therefore  shows  a  liability,  which 
is  written  in  the  left-hand  money  column. 

The  Eckhart  &  Swan  Milling  Co.'s  account  is  a  personal  account.  The  credit  side  is 
the  larger;  therefore  it  is  a  liability.     List  it  as  the  second  liability  item. 

The  last  liability  is  the  amount  of  the  balance  due  The  Macey  Co. 

Rule  a  single  red  line  of  addition  under  the  list  of  assets.  Add  the  assets,  extend  the 
total  into  the  right-hand  column,  and  write  opposite  it  the  words  * 'Total  Assets." 

Rule  a  single  red  line  under  the  list  of  liabilities.  Add  the  liabilities.  Extend  the 
total  into  the  right-hand  column  and  write  opposite  it  the  words,  "Total  Liabilities." 
Rule  a  line  across  the  second  column  and  subtract  the  total  liabilities  from  the  total  assets. 

The  result  shown  by  this  last  subtraction  is  the  net  capital,  or  worth  of  the  business,  on 
Jan.  3L     Rule  a  double  red  line  across  both  columns. 

Proof 

The  sum  of  the  proprietor's  investment,  as  now  exhibited  in  the  trial  balance,  and  the 
net  gain,  as  shown  by  the  loss  and  gain  statement,  must  exactly  equal  the  net  capital,  as 
shown  by  the  financial  statement. 

The  accuracy  of  the  two  statements  is  proved  by  applying  this  test.  It  is  called  a 
"proof"  and  should  be  written  at  the  bottom  of  the  loss  and  gain  statement  for  two  reas- 
ons :  First,  it  would  not  be  wise  to  have  the  proof,  which  shows  the  amount  of  gain,  on  the 
financial  statement,  which  is  often  seen  by  persons  other  than  the  proprietor  and  book- 
keeper. Second,  there  is  usually  more  room  to  write  it  at  the  bottom  of  the  loss  and  gain 
statement. 

Explanation:  Gains  are  increases  of  assets  or  diminutions  of  liabilities.  Losses  are 
diminutions  of  assets  or  increases  of  liabilities. 

Hence  the  amount  of  gain  for  a  given  period  will  be  exactly  the  same  as  the  increase 
of  net  assets  during  that  period.  The  amount  of  loss  will  exactly  agree  with  the  decrease 
of  net  assets. 

Mr.  Stewart's  gain  may  be  ascertained  in  either  of  two  ways.  It  is  the  difference 
between  his  net  capital  Jan.  31  and  his  investment,  or  net  capital  Jan.  1.  Or  it  is  the 
difference  between  his  gains  for  the  month  and  his  losses  for  the  month. 

If  you  find  the  sum  of  Mr.  Stewart's  investment  Jan.  1  and  his  net  gain  for  January  to 
be  exactly  equal  to  his  net  capital  as  shown  by  your  financial  statement,  write  the  proof 
at  the  bottom  of  your  loss  and  gain  statement  and  hand  in  both  statements. 

Note.  It  is  understood,  of  course,  that  the  trial  balance  is  merely  a  list  of  ledger  accounts,  and  that 
statements  could  be,  and  often  are,  taken  directly  from  the  ledger. 


y 


70 


PRACTICAL  OFFICE   WORK   AND    BOOKKEEPING 


ADDITIONAL  EXERCISES 

Exercise  I 

From  the  following  ledger  footings  and  inventories  make  W.  B.  Hayes'  financial  statement  Jan.  31, 
19 — .     Also  make  a  loss  and  gain  statement  and  proof.     Use  loose  sheets. 

W.  B.  Hayes'  Trial  Balance,  Jan.  31,  19—. 


W.  B.  Hayes,  Proprietor 
Furniture  and  Fixtures   . 

Merchandise 

Interest  

Expense 

Cash 

Notes  Receivable.  .  .  . 
John  M.  Smythe  &  Co.  . 
C.  J.  Anderson  .  .  .  ,.  . 
Steinway  Bros. .    .    .    .    . 

L.  D.Conway 

Notes  Payable 


490 

2,400 

43 

275 

3,903 

1,200 

125 

56 


8,493  99 


00 
00 
99 
00 
50 
00 
00 
50 


5,460 

560 
69 


520 

459 

1,425 


8,493 


66 

00 
33 


00 
00 
00 


99 


Inventories:   Mdse,  $2,100.00.     Furniture  and  Fixtures,  $475.00. 

If  the  losses  exceed  the  gains,  the  result  is  a  net  loss.  In  taking  the  proof,  this  must  be  deducted 
from  the  investment  in  order  to  find  the  net  capital  Jan.  31. 

Exercise  II 

Prepare  statements  from  the  facts  shown  by  the  following  footings,  taken  from  the  ledger 
of  W.  B.  Owen,  Feb.  28,  19 — ,  and  the  inventories.  Write  a  proof  at  the  bottom  of  the  loss  and  gain 
statement. 

W.  B.  Owen's  Trial  Balance,  Feb.  28,  19— 


W.  B.  Owen,  Proprietor 

Merchandise 

Real  Estate 

Expense 

Interest  

Cash 

Notes  Receivable.    .    . 

John  Doe 

Richard  Roe 

Notes  Payable 


4,256 

10,000 

272 

43 

2,405 

500 

245 

50 


17,773 


20 
00 
65 
50 
65 
00 
40 
00 


40 


14,253 
1,134 


10 
1,000 

125 
600 
650 


17,773 


20 
00 

00 
00 
00 


40 


Inventories: 

$14.70. 


Merchandise,  $3,678.20;   Real  Estate,  $9,950.00;   Interest  due  on  our  notes  payable. 


Note  that  the  interest  inventory  is  an  inventory  of  debt.  This  is  called  a  liability  inventory.  It  is 
included  among  the  liabilities  in  the  financial  statement.  It  is  added  to  the  debit  side  of  the  interest 
account  when  making  the  loss  and  gain  statement. 


CLOSING   THE    LEDGER 

Exercise  III 
W.  F.  Barnes'  Trial  Balance,  Mar.  31,  19- 


71 


W.  F.  Barnes  .  .  . 
Merchandise  .... 
Real  Estate    .... 

Expense 

Interest  

Cash 

Notes  Receivable.  . 
Accounts  Receivable 
Notes  Payable  .  .  . 
Accounts  Payable     . 


52,000 

8,000 

1,260 

320 

34,000 

12,060 

9,350 

3,700 

4,520 


125,210 


00 
00 
00 
00 
00 
00 
00 
00 
00 


00 


10,000 
53,000 


254 

33,000 

5,600 

3,356 

9,700 

10,300 


125,210 


00 
00 


00 

00 
00 
00 
00 
00 


00 


Inventories:   Mdse.,  $6,000.00;   Store  and  Lot,  $7,500.00;   Unexpired  Insurance  (which  had  been 

charged  to  Expense),  $125.00. 

Note.     Unexpired  insurance  is  a  resource  inventory.     It  represents  something  of  value  which  we 
stiU  own,  as  it  has  never  been  used. 


CLOSING  THE   LEDGER 

Mr.  Stewart  has  seen  and  approved  your  financial  statement,  loss  and  gain  statement, 
and  proof.  He  now  instructs  you  to  rule  up  the  accounts  of  the  ledger,  so  that  the  ledger 
itself  will  exhibit  the  condition  of  the  business  as  sho^vn  by  the  financial  statement,  and  the 
results  as  ascertained  in  taking  the  loss  and  gain  statement. 

Note.  Before  attempting  to  close  the  ledger,  study  carefully  the  following  directions  for  ruling, 
and  practice  the  ruling  here  assigned. 

Take  a  new  pen  point.  Moisten  it  with  your  tongue  and  wipe  it  carefully,  so  that  the  ink  will  flow 
evenly.  Do  not  overload  it  with  ink,  and  watch  it  closely  to  guard  against  spilling  ink.  Do  not  start 
to  rule  a  line  without  enough  ink  on  the  pen  to  finish  it. 

Lay  the  ruler  down  on  the  desk,  beveled  edge  up,  and  hold  the  pen  against  the  edge  when  ruling. 
If  you  were  to  lay  the  edge  of  the  ruler  next  to  the  paper  the  ink  would  fill  in  between  the  ruler  and 
the  paper  and  blot  the  line.  Hold  the  pen  sidewise,  so  as  not  to  smear  ink  on  the  ruler's  edge,  and  so 
that  the  two  nibs  of  the  pen  will  spread  apart  and  allow  the  ink  to  flow.  Make  light  lines  by  ruling 
with  the  back  of  the  pen.  Single  lines  will  be  light  lines.  Double  lines  will  be  composed  of  one  light 
line  and  one  heavy  line.  Rule  with  a  fiill  arm  sweep,  not  too  slowly.  Practice  making  heavy  and  light 
lines. 

Now  rule  a  design  as  follows,  on  a  separate  piece  of  paper:  Rule  double  lines  aroimd  a  2-inch  square. 
Mark  off  the  four  sides  into  quarter  inches  and  rule  heavy  lines  making  squares  }  inch  on  each  side. 
Rule  three  light  lines  between  the  heavy  lines,  making  small  squares  1*5  of  an  inch  on  each  side.  When 
you  have  ruled  this  design  to  your  satisfaction,  hand  it  in  to  your  teacher. 

Do  not  underestimate  the  importance  of  good  ruling.  Neat  ruling  goes  far  toward  the  production 
of  good  work,  which  will  be  an  inspiration  to  you  and  lessen  the  liability  of  mistake. 

First:  Close  with  a  balance  such  financial  accounts  as  need  to  be  balanced  at  this 
time.  This  does  not  include  personal  accounts  or  the  proprietor's  account.  It  includes 
the  cash  account  and  the  notes  payable  account,  and  would  ordinarily  include  the  notes 
receivable  account,  but  as  the  latter  contains  only  one  item,  it  will  not  be  closed  at  this 
time.  To  close  with  a  balance  an  account  having  only  one  item  would  be  a  waste  of  time. 
Close  the  cash  account  and  the  notes  receivable  account,  therefore,  as  the  first  step.    The 


72 


PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 


manner  of  closing  these  accounts  was  illustrated  in  the  chapter  on  accounts  at  the  beginning 
of  the  book. 

Note  the  amounts  due  from  the  Austin  Livery  Co.  and  E.  C.  Judson,  the  balance  of  the  notes  payable 
account,  and  amount  due  from  the  Eckhart  &  Swan  Milling  Co.  Each  represents  one  unpaid  item.  State 
which  one  in  each  case. 


Illustration  of  Merchandise  Account,  Closed 


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Next:  The  loss  or  gain  accounts  will  be  closed.     The  process  of  closing  these  accounts 
is  as  follows: 

1.  Inventories  are  entered  in  red  ink. 

2.  The  loss  or  gain  is  ascertained  and  entered  in  the  smaller  side  in  red  ink.     (See 
Illustration  of  Mdse.  account,  closed.) 


CLOSING    THE    LEDGER 


73 


3.  The  loss  or  gain  is  entered  in  the  loss  and  gain  account  in  black  ink  on  the  opposite 
side.     (See  Illustration  of  Loss  and  Gain  account,  closed.) 

The  name  and  page  of  the  loss  and  gain  account  are  entered  in  the  explanatory  and 
folio  columns  of  the  account  closed.  The  name  and  page  of  the  account  closed  are  entered 
in  the  explanatory  and  folio  columns  of  the  loss  and  gain  account  This  furnishes  a 
"cross  reference"  between  the  two  accounts. 

4.  The  inventories  are  brought  down  in  black  ink  below  the  rulings  on  the  opposite 
side  of  the  accounts  in  which  they  were  entered.  (See  the  Mdse.  account,  closed.)  A 
check  mark  ( V )  is  placed  in  the  folio  column  opposite  the  red  ink  inventory,  and  another 
opposite  the  inventory  brought  down. 

The  loss  and  gain  account  now  contains  all  the  separate  losses  and  gains  shown  by 
the  different  loss  or  gain  accounts  before  closing. 

Next:  Close  the  loss  and  gain  account  into  the  Proprietor's  account  by  the  same  process 
as  that  used  for  closing  the  separate  loss  or  gain  accounts. 

Loss  AND  Gain  Account,  Closed 


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74 


PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 


Final  Condition  of  the  Ledger.  All  loss  or  gain  accounts  are  now  closed  and 
several  of  the  financial  accounts.  Every  account  is  now  reduced  to  its  simplest  terms. 
The  balance  of  each  personal  account  is  noted  in  one  of  the  explanatory  columns  of  the 
ledger,  expressed  in  a  single  figure.  The  balances  of  cash,  notes  receivable,  and  notes 
payable  are  each  represented  in  a  single  figure.  Each  inventory  is  represented  by  a  single 
figure. 

Since  the  balances  and  inventories  all  appear  in  the  financial  statement,  it  is  clear 
that  these  should  check.  In  other  words,  the  individual  items  shown  by  the  ledger  as 
it  now  stands  should  correspond  in  detail  with  the  individual  assets  and  habilities  shown 
by  the  financial  statement. 

Balance  of  Balances.  You  will  now  hand  Mr.  Stewart  a  balance  of  balances.  This 
is  a  balance  of  the  ledger  as  it  now  stands,  all  loss  or  gain  accounts  and  several  financial 
accounts  having  been  closed.  It  is  taken  very  readily,  and  if  a  balance  is  secured,  it  is 
not  likely  that  any  mistake  has  been  made  in  closing.  Check  the  balance  of  balances  with 
the  results  shown  by  the  financial  statement,  including  the  balance  of  the  proprietor's 
account. 

THE   BANK   PROOF 

January  31.  The  bank  returns  to  you  the  checks  which  have  been  paid  by  them 
(Checks  Nos.  1,  2,  3,  4,  and  5),  together  with  the  bank's  monthly  statement  of  your  account 
(Incoming  Paper  No.  13)  showing  their  total.  The  checks  are  each  marked  paid.  Mr. 
Stewart  asks  you  to  prepare  a  bank  proof. 

The  checks  issued  by  you  were  placed  in  the  outgoing  papers  section  of  your  file.  This 
was  equivalent  to  a  delivery  of  them  to  the  parties  in  whose  favor  they  were  made  out. 
These  parties  are  assumed  to  have  endorsed  the  checks  and  presented  them  at  the  bank  for 
payment.  The  bank  then  cashed  the  checks  and  stamped  them  paid.  They  were  then 
held  at  the  bank  until  the  end  of  the  month  to  be  returned  to  you  with  the  bank's  monthly 
statement. 

Take  the  five  checks  from  your  outgoing  papers  section  to  your  teacher,  who  will  have 
them  endorsed  in  blank  by  the  proper  parties  and  cancelled  by  the  bank.  The  cancellation 
will  consist  of  the  word  "Paid"  or  "Canceled,"  the  date  (usually  the  same  day  or  one  day 
later  than  the  date  of  issue),  and  the  name  of  the  bank,  written  across  the  face  of  the  check 
in  red  ink. 

Filing.  Place  the  canceled  checks  and  the  statement  furnished  by  the  bank  in  the 
section  for  "Receipts." 

Student's  Report.  Prepare  and  hand  in  to  your  teacher  Report  No.  4,  dated  Jan.  31, 
19 — .  Follow  the  instructions  given  on  Jan.  10  for  the  filing  of  this  report.  Fill  out  this 
report  entirely,  including  the  bank  proof. 

The  Bank  Proof.  You  will  see  by  comparing  the  balance  of  the  bank  statement  with 
your  balance  as  shown  by  the  check-book  stub  that  there  is  a  difference  of  $225.00.  This 
arises  from  the  fact  that  the  bank  has  not  yet  paid  Check  No.  6,  which  is  for  $225.00. 
When  the  amount  of  this  check  is  added  to  the  balance  shown  by  the  check-book  stub,  the 
result  will  be  the  balance  shown  by  the  bank  statement. 

Do  not  consider  the  bank  statement  a  receipt,  when  you  write  the  number  of  receipts, 
but  count  each  canceled  check  as  one  receipt. 


THE  STOCK  RECORD 


75 


The  Stock  Record 

To  take  an  inventory  of  stock  by  actual  count  and  valuation  of  goods  is  a  matter  of 
some  difficulty,  and  in  case  of  a  large  stock  would  consume  a  great  deal  of  time.  The 
clerks  go  through  the  stock  systematically,  counting,  weighing,  and  measuring.  Every 
article  of  stock  is  thus  handled.  Goods  are  inventoried  at  cost,  unless  for  some  reason  they 
are  worth  more  or  less  than  their  cost. 

In  most  mercantile  houses  it  is  not  customary  to  take  an  inventory  of  stock  oftener  than 
once  a  year,  or  twice  a  year  at  the  oftenest. 

A  merchant  who  wishes  to  know  constantly  what  merchandise  is  on  hand  and  in  what 
quantities,  should  keep  a  stock  record.  He  will  enter  in  this  record  the  quantities  pur- 
chased, the  purchase  price,  and  the  quantities  sold.  By  subtracting  the  total  quantity 
of  a  given  article  sold  from  the  total  quantity  purchased  he  will  know  how  much  is  on  hand 
at  any  time.  Multiplying  this  by  the  purchase  price,  he  will  know  the  value  of  the  amount 
on  hand,  computed  at  cost. 

Mr.  Stewart  requests  you  to  prepare  a  stock  record  which  will  show  all  Mdse.  bought 
and  sold  during  January. 

Rule  a  sheet  of  paper  as  shown  in  the  following  illustration: 

Illustration  of  Stock  Record 


ARTICLES 

Bot. 

Sold 

Left 

Price 

Amount 

Pillsbury's  Best  flour,  bris 

75 

5 

5 

50 

15 

5 

70 

85 

50 

Standard  oats,  bu 

1000 

100 

50 

200 

5 

645 

52 

335 

40 

The  following  articles  are  to  be  listed.     Give  each  the  number  of  lines  indicated: 


Lines 

Lines 

Pillsbury's  Best  flour, 

3 

Ear  corn, 

4 

Best  Baker's  Patent  flour, 

2 

No.  2  spring  wheat, 

3 

Lincoln  flour 

3 

Barley  screenings. 

2 

Standard  oats, 

4 

Referring  to  the  five  invoices  of  goods  bought  (which  you  will  find  among  the  receipts 
and  among  the  unpaid  invoices),  enter  the  quantities  purchased  in  the  first  column  opposite 
the  names  of  the  articles.     Be  sure  to  return  each  invoice  to  the  file  in  which  it  belongs. 

Refer  to  the  explanations  in  the  journal  for  articles  and  quantities  sold.  Your  stock 
record  is  ruled  to  give  you  one  line  for  each  item  sold.  Write  the  quantities  sold,  each  in 
its  proper  list. 

Subtract  the  total  quantity  sold  from  the  quantity  purchased  of  each  article,  and  enter 
the  quantity  remaining  in  the  third  column. 

Write  the  cost  price  in  the  column  headed  "Price."  This  must  be  ascertained  from  the 
incoming  bills. 

Multiply  the  quantity  left  by  the  price  in  each  case,  and  place  the  result  in  the  last  col- 
umn as  shown. 


76  PRACTICAL   OFFICE   WORK   AND    BOOKKEEPING 

Add  the  results.  The  total  will  be  the  value  of  Mdse.  on  hand,  or  the  inventory.  See 
if  your  result  agrees  with  the  inventory  given  at  the  end  of  the  list  of  transactions  for 
January.     If  it  does  not,  check  over  your  work  till  you  find  your  mistake. 

Journalizing  Exercises 

(Without  explanations.) 

January  1,  19 — .     F.  H.  Harms  has  to-day  invested  in  business  cash,  $5,000.00. 

Jan.  2.     Bought  merchandise  for  cash,  $1,000.00. 

Jan.  3.     Sold  merchandise  for  cash,  $500.00. 

Jan.  4.     Bought  of  the  Cook  Company,  furniture  and  fixtures  invoiced  at  $550.00,  on  account. 

Jan.  5.  Bought  store  and  lot  for  $6,000,  payable  as  follows:  A  note  due  in  one  year  for  $2,000.00; 
a  second  note  due  in  two  years  for  $2,000.00;  and  cash,  $2,000.00. 

Jan.  6.     Sold  to  Jas.  Strong,  on  account,  merchandise  billed  at  $425.00. 

Jan.  8.  Gave  our  note  to  the  Cook  Company  for  the  furniture  and  fixtures  bought  of  them  on  the 
4th  inst. 

Jan.  8.     Paid  rent  in  cash,  $75.00. 

Jan.  9.     Received  Jas.  Strong's  note  at  30  days  in  full  of  account,  $425.00. 

Jan.  10.  Received  cash  from  Hiram  Green  for  his  note  due  to-day.  Face  of  note,  $300.00;  interest, 
60  days  at  6%,  $3.00;    total  cash  received,  $303.00. 

Jan.  11.     Paid  cash  for  our  note  due  John  Brown  for  $400.00  plus  interest  for  one-half  year  at  6%. 

Jan.  12.  A  note  which  we  hold  against  John  J.  Johnson  has  fallen  due  to-day,  for  $100.00  plus 
interest  for  one  year  at  5%.  He  pays  for  it  by  giving  us  a  new  note  for  the  amount  due,  the  new  note 
bearing  6%  interest. 

Jan.  13.  Borrowed  $100.00  of  H.  H.  Jacobs.  Gave  him  in  exchange  our  non-interest  bearing  note 
for  $110.00  due  in  one  year.  (In  other  words  we  gave  him  our  note  for  $100.00,  with  10%  interest  for 
one  year  added. 

Jan.  14.  Rented  to  Wm.  Little,  desk  room  in  our  office.  He  paid  us  $20.00  in  cash  for  the  first 
month's  rent.     (This  is  a  return  on  the  expen.se  account.) 

Jan.  15.  Sold  Wm.  Little,  one  office  desk  and  chair  for  $35.00,  on  account.  (This  is  a  return  on 
the  furniture  and  fixtures  account.) 

Jan.  16.  Bought  500  two-cent  postage  stamps  for  cash.  Accommodated  Mr.  Little  with  50  two-cent 
stamps,  which  we  charged  to  his  account. 

Jan.  17.  Settled  our  account  with  Hamilton  Mabie,  $600.00,  by  giving  him  our  note  for  $400.00, 
an  order  on  O.  R.  Williams  for  $100.00,  and  cash,  $100.00.  (O.  R.  Williams'  account  is  credited  with 
the  amount  of  the  order.) 

Jan.  18.  Endorsed  over  to  N.  V.  Lanthorne,  on  account,  a  note  in  our  favor  for  $150.00,  signed  by 
H.  H.  Harris,  on  which  interest  of  $3.50  has  accrued. 

Jan.  19.  Received  in  full  settlement  of  Robt.  Smith's  account  of  $200.00,  a  note  signed  by  Richard 
Coe,  $100.00,  on  which  $3.20  interest  has  accrued;  his  own  note  for  $50.00,  bearing  7%  intwest;  and 
cash  to  balance. 

Review  Questions.  1,  What  is  an  explanatory  journal?  2.  Describe  the  procedure  of  making 
a  deposit.  3.  What  records  are  made  of  deposits?  4.  Describe  the  pass  book  and  state  what  its  pur- 
pose is.  5.  Describe  the  check-book  stub.  6.  What  is  an  invoicef  7.  What  is  a  check?  8.  Who  are 
the  parties  to  a  check?  9.  What  is  a  lease?  10.  What  is  meant  by  "briefing"  a  document  for  purposes 
of  filing?  11.  How  and  when  should  a  check  be  endorsed?  12.  What  is  an  endorsement  "in  blank?" 
What  is  its  effect?  13.  What  is  an  endorsement  "in  full?"  What  is  its  effect?  14.  How  is  the  cash 
balance  tested  when  part  of  the  funds  are  kept  in  the  bank?  15.  Name  at  least  four  kinds  of  receipts. 
16.  May  a  mistake  be  made  in  posting  without  throwing  the  ledger  out  of  balance?  Give  illustrations. 
How  may  such  mistakes  be  discovered?  17.  Why  should  a  record  be  kept  of  all  transactions  with  regular 
customers?  How  is  this  done  when  the  customers  pay  cash?  18.  What  is  an  asset?  A  liability?  19. 
Classify  the  following  accounts  to  to  the  result  shown  by  each:  Cash,  Notes  Receivable,  Notes  Payable, 
Personal  accounts.  Real  Estate,  Mdse,  Expense,  Interest,  Loss  &  Gain,  the  Proprietor's  account  20. 
What  is  the  purpose  of  the  Financial  Statement?  Describe  it.  21.  WTiat  is  the  purpose  of  the  Loss 
&  Gain  Statement?  Describe  it.  22.  How  is  the  accuracy  of  the  two  statements  proved?  23.  How 
are  financial  accounts  closed?     24.  How  are  loss  or  gain  accounts  closed?    25.  Describe  the  process  of 

getting  a  bank  proof.    26.  How  is  a  periodical  inventory  of  stock  taken?    27.  How  may  a  stock  record 
e  kept  which  will  show  the  amoimt  on  hand  at  any  time? 


CHAPTER  III 

PRACTICAL  OFFICE  WORK  AND  BOOKKEEPING— Continued 

BUSINESS   FOR   FEBRUARY 
Transaction  No.  39 

February  2,  19 — .  Mr.  Stewart  desires  the  rent  to  be  paid  promptly.  He  therefore 
requests  you  to  write  out  a  check  for  the  February  rent  and  bring  it  to  him  for  signature. 

Note.  By  this  time  you  have  learned  that  your  teacher  will  either  sign  Mr.  Stewart's  name  or 
authorize  some  one  else  to  do  so.     No  further  directions  will  be  given  in  regard  to  this. 

Mr.  Olmstead's  receipt  will  be  found  in  the  pad  of  incoming  papers  (No.  14). 

Bookkeeping.  As  this  is  the  first  transaction  in  February,  start  a  new  page  in  the 
journal,  writing  the  name  of  the  month  in  full  at  the  top.  The  journal  entry  for  this 
transaction  should  state  that  the  rent  was  paid  for  the  month  of  February. 

Check-book  Stub.  Do  not  forget  to  deduct  the  amount  of  the  check  from  your  bank 
balance  as  shown  by  the  check-book  stub. 

Question.     Why  does  Mr.  Stewart  receive  no  lease  this  month  as  he  did  last  month? 

Transaction  No.  40 

February  3.  Mr.  Stewart  has  bought  for  cash  two  new  blank  books  for  your  use, 
advancing  the  money  out  of  his  own  pocket.  He  paid  $1.00  each  for  the  books.  He  asks 
you  to  reimburse  him  in  cash. 

You  will  receive  no  bill  or  receipt  for  this  transaction. 

Transaction  No.  41 

February  3.  A  sale  is  made  to  H.  N.  Alkire,  on  account,  of  5  brl.  Best  Baker's  Patent 
flour  at  $6.25  per  barrel.     Make  out  an  invoice. 

Bookkeeping.  This  transaction  is  not  to  be  entered  in  the  journal,  but  in  one  of  the 
new  books,  the  Sales  Book. 

THE    SALES   BOOK 

The  Sales  Book,  as  its  name  implies,  is  a  book  in  which  are  entered  all  sales  of  Mdse. 
Mr.  Stewart  has  observed  that  nearly  half  of  the  transactions  for  January  were  sales.  He 
would  like  to  have  sales  kept  separate  from  other  transactions,  for  the  future,  in  a  special 
book. 

Questions.  How  many  sales  of  Mdse.  were  made  during  January?  What  part  were  they  of  the 
entire  number  of  transactions  for  the  month? 

77 


78 


PRACTICAL  OFFICE    "WORK   AND    BOOKKEEPING 


Mr.  Stewart  calls  your  attention  to  the  fact  that  every  time  there  is  a  sale  of  Mdse., 
whether  it  be  for  cash,  on  account,  or  on  a  note,  the  same  account  is  credited,  and  also 
calls  your  attention  to  the  fact  that  during  January  it  was  necessary  to  post  all  these  credits 
separately  from  the  journal. 

Questions.  What  account  is  credited  every  time  Mdse.  is  sold?  If  there  were  ten  sales  for  cash, 
five  sales  on  account,  and  three  on  a  note,  how  many  times  would  you  have  to  post  to  the  credit  of  this 
account,  under  the  plan  followed  during  January? 

Mr.  Stewart  suggests  that  if  you  will  list  the  Mdse.  sales  all  together  in  the  new  sales 
book,  all  these  credits  may  be  added  together,  and  it  will  only  be  necessary  to  post  their 
sum  to  the  credit  of  Mdse. 

Questions.  If  there  were  eighteen  sales  of  Mdse.,  how  many  times  would  the  Mdse.  account  in  the 
ledger  be  posted  to  from  the  journal,  under  the  plan  used  for  January?  How  many  times  would  you 
have  to  post  to  the  credit  of  Mdse.  if  you  were  using  a  sales  book?  How  many  postings  would  be  saved 
by  the  use  of  the  sales  book? 

Form  of  Sales  Book 


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Do  not  copy  the  transactions  shown  in  the  above  form,  but  study  them  carefully  and 
refer  to  them  when  you  make  entries  in  the  sales  book. 


THE   SALES  BOOK 


79 


Explanation.  The  sales  book  (sometimes  called  the  sales  journal)  is  a  book  of  original  entry,  the 
same  as  the  journal.  When  the  sales  book  is  kept,  all  sales  of  Mdse.,  without  exception,  are  entered  in 
it,  and  these  transactions  are  not  entered  in  the  journal.  When  the  sales  book  and  journal  are  used  as 
books  of  original  entry,  it  is  the  province  of  the  journal  to  contain  entries  for  all  transactions  not  disposed 
of  in  the  sales  book. 

There  are  four  sales  shown  in  the  model  form  of  sales  book.  In  the  journal,  the  same  entries  would 
have  appeared  as  follows: 

February  3,  19 — 


H.  N.  Alkire 

Mdse. 

4 

31 

25 

31 

25 

The  Boston  Bakery  Co. 
Mdse. 

5 

127 

75 

127 

75 

E.  C.  Judson 

Mdse. 

7 

140 

15 

140 

15 

Cash 

Mdse. 

100 

00 

100 

00 

When  the  sales  book  is  used,  the  four  credits  of  Mdse.  are  entered  in  the  right-hand  money  column 
so  that  they  may  be  added,  and  the  total,  only,  posted  to  the  credit  of  Mdse.  The  effect  of  the  use  of 
the  sales  book  is  to  condense  the  entry,  as  follows: 


H.  N.  Alkire 

The  Boston  Bakery  Co. 

E.  C.  Judson 

Cash 

Mdse. 


31 

25 

127 

75 

140 

15 

100 

00 

399 

15 


Form.     The  date  is  written  above  the  transaction,  as  in  the  journal. 

The  name  of  the  account  debited  is  written  on  the  first  line  below  the  date,  and  at  the  extreme  left 
of  the  wide  column. 

The  left-hand  narrow  column  is  not  used.  In  the  right-hand  narrow  column  (L.  F.)  the  ledger 
folio  is  written  at  the  time  of  posting. 

At  the  right-hand  side  of  the  wide  column,  on  the  first  line,  and  opposite  the  name  of  the  account 
to  be  debited,  are  noted  the  terms  of  the  sale,  as  "On  account,"  "IS-day  note,"  "cash,"  etc. 

The  items  of  the  sale  are  written  in  the  wide  column,  indented  about  one-half  of  an  inch  from  the 
L.  F.  column.  The  amounts  of  the  separate  items  are  written  in  the  left-hand  money  column,  a  single 
line  ruled  underneath  the  last  amount,  and  the  total  written  in  the  right-hand  money  column,  on  the 
same  line  with  the  last  item.  If  there  is  only  one  item,  the  amount  is  entered  at  once  in  the  right-hand 
money  column,  the  left-hand  column  being  left  blank,  as  in  the  first  sale. 

When  it  is  desired  to  post  the  footing  of  the  sales  book  to  the  credit  of  the  Mdse.  account  in  the 
ledger,  a  single  line  is  ruled  underneath  the  amount  of  the  last  sale,  and  the  sales  added.  The  sales  book 
is  then  ruled  up,  as  shown  in  the  model. 

Posting.  The  separate  amounts  are  posted  to  the  debits  of  the  separate  accounts  named,  and  the 
total  is  posted  to  the  credit  of  Mdse.  As  each  item  is  posted,  the  ledger  page  is  entered  in  the  L.  F. 
column  opposite  the  name  of  the  account.  In  making  the  entry  in  the  ledger,  use  the  initial  S  (for  Sales 
Book)  as  an  explanation. 


80  PRACTICAL   OFFICE    WORK   AND    BOOKKEEPING 

Note  that  in  the  model  the  L.  F.  column  is  not  filled  out.  It  is  improper  to  insert  the  folios  except 
at  the  precise  moment  the  posting  is  done. 

The  terms  of  the  sale  to  E.  C.  Judson,  Feb.  5,  were  "Cash,"  and  Mr,  Judson  paid  the  cash  when  he 
bought  the  goods.  This  could  have  been  disposed  of  by  an  entry  debiting  the  cash  account,  without 
showing  Mr.  Judson's  name.  But  Mr.  Stewart  wishes  all  transactions  with  persons  having  accounts 
with  us  to  show  in  the  ledger.  He  therefore  instructs  that  in  a  case  of  this  kind  you  are  to  charge  the 
amount  of  the  sale  to  the  customer  in  the  sales  book,  just  as  if  it  were  bought  on  account,  and  at  the 
same  time  give  the  customer  credit  in  the  journal  for  the  amount  of  cash  paid.  The  effect  of  this  plan, 
as  you  can  see,  will  be  that  both  the  purchase  and  the  payment  will  show  in  the  customer's  account  in 
the  ledger,  the  purchase  being  posted  from  the  sales  book,  and  the  payment  being  posted  from  the  journal. 
As  the  two  entries  just  cancel  each  other,  the  balance  of  the  customer's  account  stands  unchanged  after 
both  are  posted. 

Transaction  No.  42 

February  4.     Mr.  Stewart  hands  you  incoming  paper  No.  15. 
The  terms  of  this  bill  are  "On  account." 

Transaction  No.  43 

February  4.  We  sell  to  The  Boston  Bakery  Co.  on  their  fifteen-day  note  at  6%  (incom- 
ing paper  No.  16),  5  brl.  Lincoln  flour  at  $5.25,  and  145  bu.  Standard  oats  at  70(i. 

Filing.  Receipt  the  invoice  by  writing  across  its  face  at  the  bottom  the  words,  "  Paid 
by  15-day  note  Feb.  4,  19 — .  D.  B.  Stewart  by  (your  name)."  Deliver  the  receipted  bill 
to  The  Boston  Bakery  Co.  by  filing  it  with  the  outgoing  papers.  File  the  note  in  the 
section  marked  "Cash  Register  and  Notes  Receivable." 

Transaction  No.  44 

February  5.     We  sell  to  E.  C.  Judson  136  bu.  ear  corn  at  650  and  45  bu.  No.  2  spring 
wheat  at  $1.15.    Mr.  Judson  gives  us  his  check  in  payment. 
Billing.    Make  out  an  invoice  and  receipt  it. 

Transaction  No.  45 

February  5.     Deposit  the  check  received  to-day. 

See  instructions  for  depositing,  given  on  Jan.  1. 

Do  not  forget  to  endorse  the  check.     Endorse  it  in  blank. 

Are  you  entering  all  deposits  in  your  check-book  stub? 

Transaction  No.  46 

February  6.     Receive  $45.00  in  cash  from  the  Austin  Livery  Co.  on  account. 

Take  $25.00  from  the  outgoing  papers  section  and  ^20.00  from  the  currency  envelope. 
Make  out  a  receipt  for  $45.00  "on  account."  Record  the  transaction  on  the  receipt  book 
stub. 

Transaction  No.  47 

February  6.  The  Eckhart  &  Swan  Milling  Co.  presents  for  payment  to-day  a  note 
signed  by  Mr.  Stewart.  Mr.  Stewart  instructs  you  to  compute  the  interest  accrued  on  the 
note,  and  draw  a  check  for  the  amount  of  the  note  and  interest,  which  check  he  will  sign. 

Take  the  note  from  the  outgoing  papers  section.  Observe  that  it  is  dated  ten  days 
ago  and  bears  6%  interest.  The  interest  on  $300.00  for  10  days  at  6%  is  500.  Draw  a 
check  for  $300.50. 


TRANSACTIONS — CONTINUED  81 

Eckhart  &  Swan  cancel  the  note  thus:  "Paid  Feb.  6,  with  500  interest.  Eckhart  & 
Swan  Milling  Co.,  by  F.  G."    Your  teacher  will  tell  you  how  to  secure  this  cancellation. 

Check-book  Stub.  Do  not  fail  to  deduct  the  amount  of  the  check  from  the  balance 
shown  on  the  check-book  stub. 

Transaction  No.  48 

February  7.     Mr.  Stewart  has  arranged  to  receive  from  H.  N.  Alkire,  his  note  at  30 
days,  bearing  6%  interest,  for  $783.00,  the  balance  due  on  his  last  month's  account. 
The  note  is  Incoming  Paper  No.  18. 

Filing.  When  you  have  examined  the  note  carefully  to  see  that  it  is  correct  in  every 
particular,  place  it  in  the  section  where  it  belongs. 

Search  through  the  outgoing  papers  section  until  you  find  the  bill  or  bills  covered  by 
the  payment  of  $783.00.     Receipt  it  (or  them)  and  replace  in  the  same  section  of  the  file. 

Transaction  No.  49 

February  7.  Receive  cash  for  15  brl.  Best  Baker's  Patent  flour  at  $6.25  and  10  bu. 
ear  corn  at  62^0. 

The  cash  may  be  taken  from  the  currency  envelope.     No  invoice  is  to  be  made  out. 

Transaction  No.  50 

February  7.     Make  a  deposit  of  $100.00  in  currency. 

Mr.  Stewart  now  suggests  that  you  post  aU  entries  in  both  books,  up  to  date. 

Post  all  sales  book  entries.  First,  post  all  the  debits,  entering  the  ledger  page  in  the 
L.  F.  column  as  each  item  is  posted,  and  at  the  same  time  entering  the  sales  book  folio  in 
the  ledger  thus:  S.  1.  Use  the  abbreviation  "Mdse."  as  an  explanation  in  each  case. 
Do  not  post  the  footing  of  the  sales  book  at  this  time. 

Post  the  entries  from  the  journal.     Prove  the  cash. 

Fill  out  Students'  Report  No.  5,  all  except  the  bank  proof.  Before  handing  it  in,  turn 
to  the  questions  on  page  52,  and  be  able  to  answer  them  all  satisfactorily.  In  answering 
the  third  question,  remember  the  unposted  total  of  the  sales  book. 

THE   BILL   BOOK 

On  February  3,  Mr.  Stewart  bought  a  blank  bill  book.  He  now  hands  it  to  you  with  the 
remark  that  he  would  like  you  to  keep  in  it  a  record  of  all  notes  received  by  us  from  others 
and  issued  by  us  to  others,  beginning  with  January  1.  Before  you  can  do  this  intelligently 
you  will  have  to  examine  the  book  carefully  and  study  the  forms  shown  herewith. 

Nature  of  the  Bill  Book.  The  bill  book,  or  register  of  notes  receivable  and  payable,  is  an  auxiliary 
book.  From  the  definition  of  this  term,  as  given  on  a  preceding  page,  you  know  that  this  means  it  is 
a  book  of  memorandum.  It  is  not  a  book  of  original  entry;  the  original  entries  involving  the  receiving  or 
issuing  of  notes  are  made  in  the  journal  or  sales  book  (usually  in  the  journal).  It  is  not  a  book  of  final 
record;  the  book  of  final  record  is  the  ledger,  in  which  are  kept  accounts  with  notes  receivable  and  notes 
payable.  The  sole  purpose  of  the  bill  book  is  to  furnish  a  memorandum  of  facts  in  regard  to  the  various 
notes  receivable  and  notes  payable,  and  especially  to  show  when  the  notes  fall  due,  so  that  they  may  be 
paid  or  collected,  as  the  case  may  be,  at  the  proper  time. 

Observe  that  the  bill  book  is  divided  into  two  parts,  one  for  notes  receivable  and  one  for  notes  payable. 


82 


PRACTICAL   OFFICE    WORK   AND    BOOKKEEPING 

NOTES 


Date 
Rec'd 

1 

Our 

No. 

Maker  or  Acceptor 
(Payer) 

In  favor  of 
(Payee) 

Where  Payable 

Rec'd  for 

Date  of 
Paper 

19— 

Jan. 

Feb. 

15 
4 

7 

1 
2 
3 

Austin  Livery  Co 

The  Boston  Bakery  Co 

H.  N.  Alkire 

D.  B.  Stewart 
D.  B.  Stewart 
D.  B.  Stewart 

Maker's  Office 

Union  Trust  Co 

Maker's  Office 

On^ 

On  % 

Jan.  Bal. 

19— 
Jan. 

Feb. 

Feb. 

15 
4 

7 

Notes  Receivable 

In  this  book  are  recorded  all  notes  which  we  receive  from  others  and  all  facts  pertaining 
to  them.     The  record  extends  across  two  pages. 

Note  No.  1.  This  note  was  received  Jan.  15,  and  this  date  is  written  in  the  column  headed,  "Date 
received."     It  is  No.  1  because  it  is  the     first  note  received.     The  next  will  be  No.  2,  and  so  on. 

The  maker  was  the  Austin  Livery  Co.,  and  their  name  is  written  in  the  column  headed  "Maker  or 
Acceptor."  (The  word  "Acceptor"  is  a  term  used  in  connection  with  drafts.  You  do  not  need  to  con- 
sider it  at  this  time.) 

The  note  was  made  in  favor  of  D.  B.  Stewart.  (In  case  it  had  been  issued  originally  to  some  other 
person,  from  whom  Mr.  Stewart  had  bought  it,  that  person's  name  would  appear  in  this  column.) 

It  is  payable  at  the  maker's  office.  All  notes  are  payable  at  the  office  of  the  maker  unless  otherwise 
stated  on  the  face  of  the  note.  Sometimes  it  is  stipulated  that  a  note  is  payable  at  a  certain  bank,  or 
some  other  place  where  it  is  convenient  for  the  maker  to  pay  it.  The  payee  must  present  it  for  payment 
at  the  place  designated  by  the  maker. 

The  fact  that  a  note  is  payable  at  a  certain  bank  merely  indicates  the  phce  where  it  will  be  paid,  and 
does  not  authorize  the  bank  to  pay  it  from  the  funds  of  the  maker.  The  bank  will  not  pay  out  any  part 
of  the  balance  of  a  depositor  except  on  his  express  order. 

Under  the  heading  "Received  for"  is  written  the  explanation  of  the  existence  of  the  note.  In  this 
case  it  was  received  on  the  account  of  the  Austin  Livery  Co. 

Date  of  paper.  The  date  of  Note  Receivable  No.  1  is  Jan.  15,  the  same  as  the  date  when  received. 
These  two  dates  are  not  always  the  same.  When  we  buy  an  old  note,  or  when  a  note  is  dated  ahead 
or  dated  back,  these  dates  differ. 

Time,  30  days.     This  time  is  added  to  the  date  of  the  paper  to  find  the  due  a  ate. 

When  due.  Find  the  due  date  of  the  paper  and  write  the  day  of  the  month  in  the  proper  square. 
Note  Receivable  No.  1  is  due  on  Feb.  14,  19 — . 

The  column  headed  "Face"  is  the  last  column  filled  out  at  the  time  the  paper  is  received.  The 
four  right-hand  columns  will  not  be  filled  out  until  the  note  is  paid. 


NOTES 


Date 
Issued 

Our 
No. 

Maker  or  Acceptor 
(Payer) 

In  favor  of 
(Payee) 

Where  Payable 

Given  for 

Date  of 
Paper 

19— 
Jan. 

Jan. 

Jan. 

1 
13 

27 

1 
2 
3 

D.  B.  Stewart 
D.  B.  Stewart 
D.  B.  Stewart 

Nat'l  Cash  Reg.  Co. 

Kemper  Bros.  Co. 

Eckhart  &  Swan  M.Co. 

Our  Office 
Our  Office 
Our  Office 

Cash  Reg. 
Mdse. 
On% 

19— 
Jan. 

Jan. 

Jan. 

1 

13 
27 

THE    BILL    BOOK 


83 


RECEIVABLE 


Rate 
of 
Int. 

j                                         When  Due 

Disposed  of 

Time 

Year 

J3 

o. 

3 

■-9 

•-5 

iiii 

"6 
O 

Face 

When 

How     Int.  Reed. 

j 

Amt.Recd. 

Days 
30 

6% 

19— 

14 

50 

00 

15 

6% 

19— 

19 

127 

75 

30 

6fo 

19— 

9 

783 

00 

Enter  Note  Receivable  No.  1  as  above  described.  Enter  Note  No.  2.  This  is  the 
note  received  from  The  Boston  Bakery  Co.  (Transaction  No.  43.)  Enter  Note  No.  3. 
This  is  the  note  received  from  H.  N.  Alkire  on  account  on  Feb.  7.    (Transaction  No.  48). 

Notes  Payable 

The  memorandums  kept  for  this  book  are  similar  to  those  kept  for  Notes  Receivable. 
D.  B.  Stewart's  name  always  appears  as  maker,  however,  in  case  of  Notes  Payable,  whereas 
in  case  of  Notes  Receivable  his  name  appears  as  payee,  if  it  appears  at  all. 

The  three  notes  payable  which  Mr.  Stewart  issued  during  January  are  listed  in  this  book  as  No.  1, 
No.  2  and  No.  3.  Observe  that  No,  1  was  given  for  a  cash  register,  No.  2  was  given  for  Mdse.  purchased, 
and  No.  3  was  given  on  account. 

Fill  out  the  data  required  for  these  three  notes  payable,  referring  to  your  journal  for 
the  facts.  Observe  that  the  four  columns  at  the  right,  under  the  general  heading,  "Re- 
deemed," are  filled  out  for  the  three  notes  payable. 

This  brings  your  bill  book  up  to  date. 

In  future,  make  these  memorandums  in  your  bill  book,  making  each  at  the  time  of 
making  the  original  entry  for  the  transaction  in  your  journal  or  sales  book. 


Transaction  No.  51 

February  9.     Mr.  Stewart  hands  you  incoming  paper  No.  19. 
Verify  the  extensions  and  footings. 

Transaction  No.  52 

February  10.     We  are  handed  a  bill  for  drayage  (Incoming  Paper  No.  20),  which  Mr. 
Stewart  instructs  you  to  pay  in  cash.    The  bill  is  already  receipted. 

PAYABLE 


Rate 
of 
Int. 

When  Due                                        | 

1 

Redeemed 

Time 

Year 

a 
>-> 

J3 

0. 
< 

c 

3 

i-s 

si 

3 
< 

0. 

0 

C 

> 

0 

Q 

Face 

When 

How 

Int. 

Amt.  Pd. 

30  Days 

— 

19— 

31 

225 

00 

Jan. 

31 

Ck.No.6 





225 

00 

15  Days 

— 

19— 

28 

455 

00 

Jan. 

28 

Ck.No.5 

— 

- 

455 

00 

10  Days 

6% 

19— 

6 

300 

00 

Feb. 

6 

Ck.No.8 

50 

300 

50 

84  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

Take  $10.00  from  the  cash  register,  and  place  it  in  the  outgoing  papers  section,  taking 
from  the  outgoing  papers  section  a  $2.00  bill,  which  you  will  return  to  the  cash  register. 

Transaction  No.  53 

February  11.  We  sell  to  J.  T.  Hooper,  5365  S.  63d  St.,  City,  on  account,  20  brl.  Pills- 
bury 's  Best  flour  at  $6.80,  and  25  brl.  Lincoln  flour,  at  $5.20  per  brl. 

Bookkeeping.  Make  the  entry  in  the  sales  book.  Write  Mr.  Hooper's  address  on 
the  line  with  his  name,  writing  in  a  small  hand,  so  that  the  name,  address,  and  terms 
may  all  be  written  on  the  same  line. 

Transaction  No.  54 

February  12.     Receive  cash  for  10  brl.  "XXXX  Best"  Patent  flour  at  $6.50  per  barrel. 
The  cash  will  be  found  in  the  envelope  marked  "Currency"  (three  $20.00  bills  and  a 
$5.00  bill).     No  invoice  will  be  made  out. 

Transaction  No.  55 

February  14.  Receive  the  Austin  Livery  Co.'s  check  for  $50.25,  in  payment  of  their 
note  dated  Jan.  15,  $50.00,  with  interest  for  30  days  at  6%,  25  cents. 

The  note  is  in  the  notes  receivable  section  of  the  file.  Cancel  it  and  return  it  to  the 
outgoing  papers  section. 

This  check  is  Incoming  Paper  No.  21.  Detach  it  from  the  pad  and  verify  the  amount 
of  interest. 

COMPUTING  INTEREST 

"Interest  at  6%"  means  that  six  per  cent  of  the  face  of  the  note  must  be  paid  every  year  by  the 
maker  to  the  payee  for  the  use  of  the  money  which  he  owes  to  the  payee.     In  this  case,  the  Austin  Livery 
Co.  owes  Mr.  Stewart  $50.00,  and  must  pay  him  at  the  rate  of  6%  per  annum  for  interest  on  it. 
6%  of  $50.00  is  found  by  multiplying  $50.00  by  .06,  or  six  hundredths. 

$50.00,  face  of  note 
.06,  rate  of  interest 


$3 .  00  yearly  interest 

A  year  has  365  days  (or  366).  For  purposes  of  rapid  computation,  an  interest  year  is  usually  counted 
as  360  days,  divided  into  12  months  of  30  days  each. 

6%  per  year  is  one-half  of  1%  every  month,  or  1%  every  2  months. 

The  commonly  accepted  method  of  computing  6%  interest  is  as  follows: 
-    Write  the  amount  upon  which  interest  is  to  be  figured.     Point  off  1%  of  this  amount  by  moving  the 
decimal  point  two  places  to  the  left.  This  is  the  amount  of  Interest  for  2  months,  or  60  days,  at  6%. 
Using  this  as  a  basis,  add  to  it  or  subtract  from  it  whatever  part  of  it  is  necessary  to  give  the  result  for 
the  required  number  of  days. 

In  the  above  case,  the  interest  on  $50.00  for  60  days  at  6%  is  found  by  removing  the  decimal  point 
two  places  to  the  left — $0.50. 

The  interest  for  30  days  would  be  just  half  of  this,  or  $0.25. 

Bookkeeping.     Make  the  entry  in  the  journal  and  record  in  the  bill  book  the  date  the 
note  was  paid,  the  manner  of  payment,  the  interest,  and  the  full  amount  received  by  us. 
Cancel  the  note  and  return  it  to  the  Austin  Livery  Co. 

Transaction  No.  56 

February  14.  Deposit  the  check  just  received,  and  all  but  $44.00  of  the  currency  on 
hand.  Endorse  the  check  in  blank.  Enter  the  amount  of  the  deposit  on  the  stub  of  the 
check-book. 


TRANSACTIONS — CONTINUED  85 

Transaction  No.  57 

February  14.  Your  salary  has  not  been  paid  for  two  weeks.  Mr.  Stewart  pays  you 
in  cash,  from  the  cash  register,  $40.00. 

Post  all  transactions  up  to  date.  First,  post  unposted  sales  book  items,  as  described 
after  Transaction  50.  Do  not  post  the  footing  of  the  sales  book  at  this  time ;  Mr.  Stewart 
wishes  this  posted  at  the  end  of  the  month  only,  so  that  the  sum  posted  will  show  the 
sales  for  the  month  in  a  single  amount.    Post  the  entries  from  the  journal.    Prove  the  cash. 

Student's  Report  No.  6  should  be  made  out  at  this  time.  Do  nothing  with  the  bank 
proof.  After  filling  out  the  report,  refer  to  the  questions  on  page  52,  as  usual.  If  you  can 
answer  them  all  satisfactorily,  hand  in  your  report. 

Take  a  trial  balance.  In  order  to  secure  a  balance,  it  will  be  necessary  to  include  the 
total  of  sales  to  date  as  a  credit.  Add  the  sales  book,  placing  the  total  just  underneath 
the  last  sale  in  small  lead  pencil  figures.  Include  this  amount  in  the  trial  balance,  using 
the  explanation,  "Footing  of  sales  book — not  posted." 

Transaction  No.  58 

February  16,  E.  C.  Judson  purchases  on  account,  10  brl.  Lincoln  flour  at  $5.50  and 
100  bu.  No.  2  spring  wheat  at  $1.15. 

Transaction  No.  59 

February  17.  The  Boston  Bakery  Co.  has  sent  us  a  10-day  note  to  cover  last  month's 
balance.     The  note  bears  6%  interest. 

This  is  Incoming  Paper  No.  22.     Detach  it  from  the  pad  and  examine  it  carefully. 

Fill  out  the  bill  book  record.     (This  is  Note  Receivable  No.  4.) 

Filing.     Notes  receivable  are  kept  with  the  cash. 

Take  from  the  outgoing  papers  section  the  bill  or  bills  covered  by  this  note,  write  a, 
proper  receipt  upon  them,  and  return  them  to  the  same  section  of  the  file.     Remember 
that  $20.00  has  already  been  paid  on  one  of  these  bills. 

Transaction  No.  60 

February  18.  H.  N.  Alkire  purchases  on  account,  40  brl.  Bohemian  Rye  flour  at  $6.00 
per  barrel  and  60  bu.  ear  corn  at  70^. 

Transaction  No.  61 

February  18.  Mr.  Stewart  suggests  that  The  Eckhart  &  Swan  MilUng  Co.  should  be 
paid  the  balance  due  them  on  last  month's  account. 

Ascertain  what  this  amount  is  and  write  a  check,  which  Mr.  Stewart  will  sign.  Take 
from  the  ''Invoices  Payable"  section  the  bill  covered  by  this  payment. 

Bookkeeping.     Do  not  forget  the  record  which  should  be  made  on  the  check-book  stub. 

Filing.  Attach  the  check  to  the  invoice  and  mail  by  placing  them  in  the  outgoing 
papers  section. 

Transaction  No.  62 

February  19.  Receive  The  Boston  Bakery  Co.'s  check  for  $128.07  in  payment  of 
their  note  of  Feb.  4,  for  $127.75  with  6%  interest  for  15  days. 


86  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

The  check  is  Incoming  paper  No.  23.  Detach  it  from  the  pad  and  ascertain  whether 
the  interest  has  been  correctly  computed.  If  so,  cancel  the  note.  In  computing  interest, 
bear  in  mind  that  15  days  is  |  of  60  days. 

Bookkeeping.     Fill  out  the  last  four  columns  in  the  bill  book.     See  transaction  Np.  55. 

The  canceled  note  should  be  returned  to  the  makers. 

Transaction  No.  63 

February  19.  Deposit  the  check  just  received.  Do  not  fail  to  endorse  it.  Remember 
to  enter  the  deposit  on  the  check-book  stub. 

The  Eckhart  &  Swan  Milhng  Co.  returns,  marked  "Paid,"  the  invoice  for  which  we  sent 
our  check  yesterday.  Take  the  bill  from  the  outgoing  papers  section,  have  it  canceled  thus: 
"  Paid,  Feb.  18,  19—.    Eckhart  &  Swan  Milhng  Co.,  by  M.  N.,"  and  file  it  with  the  receipts. 

Transaction  No.  64 

February  20.  Mr.  Stewart  remarks  that  the  bill  of  The  Macey  Co.  should  be  paid  at 
once.     It  has  already  remained  unpaid  too  long.     Ascertain  the  amount  due  them. 

Take  their  bill  for  furniture  sold  us  on  Jan.  1  from  the  unpaid  invoices  file. 

Mr.  Stewart  instructs  you  to  pay  this  bill  as  follows:  Give  The  Macey  Co.  an  order  on 
E.  C.  Judson  for  $130.00,  which  amount  he  owes  us;  and  our  check  for  the  remainder. 

Refer  to  the  ledger  and  you  will  find  that  E.  C.  Judson  owes  Mr.  Stewart  SI 30.00  for 
goods  bought  Jan.  20.  Mr.  Stewart  has  a  right  to  ask  Mr.  Judson  to  pay  this.  He  there- 
fore instructs  you  to  write  Mr.  Judson  a  letter  requesting  him  to  pay  the  SI 30.00  to  The 
Macey  Co. 

Make  out  a  check  for  $36.50,  in  favor  of  The  Macey  Co.    Mr.  Stewart  will  sign  it. 

Bookkeeping.  Charge  The  Macey  Co.  $166.50;  for  we  have  settled  with  them  for 
the  entire  bill.  Credit  cash  paid  out,  $36.50.  Credit  E.  C.  Judson  $130.00,  just  the 
same  as  if  he  had  paid  us  direct. 

Filing.  Mail  the  letter  and  the  check  both  to  The  Macey  Co.  by  placing  them  with 
the  outgoing  papers.  The  Macey  Co.'s  bill  should  be  sent  along  with  the  remittance,  so 
that  they  can  receipt  and  return  it. 

The  letter  instructing  E.  C.  Judson  to  pay  The  Macey  Co.  was  mailed  to  The  Macey 
Co.,  not  to  Mr.  Judson.  The  reason  for  this  is  obvious.  The  Macey  Co.  will  take  the 
letter  to  Judson  when  they  go  to  collect  the  money. 

This  order  if  written  out  in  full  would  be  called  a  draft  on  E.  C.  Judson.  The  student  is  not  expected 
to  prepare  a  draft  in  formal  manner  at  this  time.     More  will  be  said  of  drafts  later. 

Transaction  No.  65 

February  20.  We  sell  to  the  Austin  Livery  Co.,  on  account,  100  bu.  Standard  oats 
at  72^^  and  100  bu.  ear  corn  at  Q2<t. 

Forwarding  the  Footing  of  the  Sales  Book.  This  is  the  last  item  which  can  be 
written  on  page  1  of  the  sales  book.     Rule  a  single  line  of  addition,  and  add  the  column.. 


TRANSACTIONS CONTINUED  87 

Opposite  the  footing  write  the  word  "  Forwarded."    Write  the  amount  at  the  top  of  page  2, 
on  the  first  line,  and  write  opposite  this  the  words  "Brought  Forward." 

Transaction  No.  66 

February  21.  Mr.  Stewart  instructs  you  to  send  our  30-day  note  for  $950.00  at  6% 
interest,  to  the  Eckhart  &  Swan  Milhng  Co.,  to  cover  their  bill  of  Feb.  4. 

Detach  a  note  from  the  pad  of  blank  notes  and  fill  it  out  as  Mr.  Stewart  has  instructed 
you.     Do  not  forget  to  make  a  proper  record  on  the  stub  of  the  book  of  blanks. 

Take  the  invoice  from  the  "Invoices  Payable"  section,  have  Eckhart  &  Swan's  receipt 
written  upon  it,  and  file  with  the  receipts. 

The  Macey  Co.'s  bill  for  $166.50  has  been  returned  marked  "Paid."  Take  it  from  the 
outgoing  papers  section  and  have  their  receipt  written  upon  it. 

Post  to  date  and  make  out  Student's  Report  No.  7.  Can  you  answer  satisfactorily 
the  questions  on  page  52?    K  so,  hand  in  the  report. 

Transaction  No.  67 

February  23.  We  sell  to  The  Boston  liakery  Co.,  on  account,  100  bu.  No.  2  spring 
wheat  at  $1.20  and  20  brl.  XXXX  Best  Patent  flour  at  $6.50. 


Transaction  No.  68 

February  23.  J.  T.  flooper  purchases  on  account,  200  bu.  Standard  oats  at  66§^  and 
10  brl.  XXXX  Best  Patent  flour  at  $6.50. 

Are  you  filling  out  invoices  neatly  and  in  your  very  best  handwriting?  Remember  that  a  great  deal 
depends  on  the  care  with  which  you  do  your  work.  Neat,  careful  work  is  not  only  more  creditable  to 
you,  but  lessens  the  likelihood  of  error. 

Transaction  No.  69 

February  24.  Mr.  Stewart  instructs  you  to  remit  to  the  Pillsbury- Washburn  Flour 
Mills  Co.,  in  payment  of  their  last  bill,  as  follows:  Send  them  our  60-day  note  for  $500.00, 
dated  Feb.  9,  the  date  of  the  bill  bought  of  them,  and  bearing  6%  interest;  and  our  check 
for  the  balance  of  the  bill. 

Do  not  forget  to  deduct  the  amount  of  the  check  from  the  balance  shown  by  the  check- 
book stub.     The  note  issued  is  Note  Payable  No.  5. 

Filing.  The  note,  the  check,  and  Pillsbury- Washburn's  invoice  (which  you  will  take 
from  the  "Invoices  Payable"  section)  are  to  be  fastened  together  and  mailed. 

Transaction  No.  70 

February  24.  We  sell  to  the  Austin  Livery  Co.,  on  account,  50  bUu  No.  2  spring  wheat 
at  $1.15  and  40  bu.  ear  corn  at  650. 


88  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

Transaction  No.  71 

February  25.  J.  T.  Hooper  has  sent  us  his  check  for  $266.00  in  payment  of  his  bill 
of  Feb.  11.     The  check  is  Incoming  Paper  No.  24. 

Take  the  bill  from  the  outgoing  papers  section,  write  a  receipt  at  the  bottom,  and 
return  it  to  the  same  section. 

Transaction  No.  72 

February  25.     H.  N.  Alkire  purchases  on  account,  40  brl.  Pillsbury's  Best  at  $6.90. 

Transaction  No.  73 

February  25.  Deposit  the  check  you  received  today.  Do  not  forget  to  endorse  it. 
Add  the  amount  to  the  balance  shown  on  the  check-book  stub. 

Transaction  No.  74 

February  26.  During  the  past  few  weeks  Mr.  Stewart  has  made  a  number  of  small 
expenditures,  taking  the  money  from  his  own  pocket  from  time  to  time.  These  items 
amount  to  $15.00,  and  Mr.  Stewart  requests  you  to  give  him  a  check  for  this  amount, 
charging  Expense. 

When  a  depositor  wishes  to  yrithdraw  cash  from  his  bank  account,  it  is  customary  to  draw  a  check 
In  favor  of  "Currency."  He  presents  this  check  at  the  bank  and  receives  cash  in  exchange  for  it.  A 
check  so  made  out  is  payable  to  bearer,  and  no  endorsement  is  necessary  to  complete  the  authorization 
to  the  bank  to  pay  it.  Yet  most  banks,  though  fully  empowered  to  pay  such  a  check  to  any  bearer,  will 
nevertheless  require  the  person  receiving  the  money  to  write  his  name  on  the  back  as  a  matter  of  informa- 
tion, especially  if  he  is  not  known  at  the  bank. 

Sometimes  the  depositor  draws  the  check  in  favor  of  "Self"  or  "Myself,"  in  which  case  his  endorse- 
ment is  necessary  before  the  check  will  be  paid.  This  is  a  good  plan  when  the  drawer  expects  to  carry 
the  check  about  with  him  for  some  time  before  presenting  it  to  the  bank  for  payment. 

The  check  you  are  to  make  out  will  read: 


N".    -'^  Chicago,   February   26,    19 

MERCHANTS  EXCHANGE  BANK 

Pay  to  the  order  of Currency $15.00 

Fifteen   and  ^ Dollars 

D.  B.  Stewart 


Bookkeeping.     Your  journal   explanation  for  this  entry  should  be:    "Paid  to  D.  B. 
Stewart  for  sundry  petty  expenses." 


A    BANK   STATEMENT  89 

The  Pillsbury- Washburn  Flour  Mills  Co.  has  returned  the  Feb.  9  invoice  marked,  "Feb. 
24,  19—.  Rec'd  note  S500.00;  cash  $610.00.  Pillsbury- Washburn  Flour  Mills  Co.,  by 
D.  F."     (Have  this  done  for  them.)     File  it  with  the  receipts. 

Transaction  No.  75 

February  26.  Receive  $282.00  in  cash  from  H.  N.  Alkire,  in  settlement  of  his  bill 
of  Feb.  18.  (Take  $232.00  from  the  currency  envelope  and  $50.00  from  the  outgoing 
papers  section  of  the  file.) 

Transaction  No.  76 

February  26.     Deposit  $200.00  cash. 

Are  you  remembering  to  add  deposits  to  the  balance  of  the  check-book  stub? 

Transaction  No.  77 

February  27.  We  sell  to  The  Boston  Bakery  Co.,  on  account,  20  brl.  Bohemian  Rye 
flour  at  $6.30  and  40  bu.  ear  corn  at  62^^. 

Transaction  No.  78 

February  27.  Receive  The  Boston  Bakery  Co.'s  check  for  their  note  of  Feb.  17,  due 
today,  $565.25,  and  interest  for  10  days  at  6%,  94  cents.     Amount  of  check,  $566.19. 

Verify  the  interest. 

Transaction  No.  79 

February  27.     Deposit  the  check  last  received. 

Transaction  No.  80 

February  28.     Your  own  salary  for  two  weeks  is  now  due.     This  is  paid  in  cash. 
Did  you  endorse  the  check  deposited  yesterday? 

THE  BANK  STATEMENT 

February  28.  The  bank  clerk  i-etums  to  you  checks  No.  6,  7,  8,  9,  10,  11,  and  12, 
canceled,  together  with  a  bank  statement  (Incoming  Paper  No.  26). 

Take  the  seven  checks  from  the  outgoing  papers  section  of  the  file  and  have  them 
endorsed  by  the  proper  parties  and  canceled  by  the  bank,  as  on  Jan.  31. 

Since  all  the  checks  have  been  paid  by  the  bank,  the  balance  shown  by  the  bank  state- 
ment should  exactly  agree  with  the  balance  shown  by  your  check-book  stub.     Does  it? 

Note.  This  is  an  unusual  condition.  There  are  usually  some  outstanding  checks,  so  that  it  is  neces- 
sary to  reconcile  the  check-book  balance  and  the  bank  statement  by  means  of  a  bank  proof. 

Post  the  sales  book  and  journal  to  date.  After  all  sales  book  items  have  been  posted 
separately  as  debits,  rule  and  add,  and  post  the  total  to  the  credit  of  Mdse.  Write  opposite 
the  total  in  the  sales  book,  "Mdse.  Cr.  for  total,"  and  enter  the  ledger  page  in  the  L.  F. 
column.  As  an  explanation  in  the  ledger,  write  "Sales  total,"  and  enter  the  sales  book 
page  in  the  folio  column.     Use  the  date  Feb.  28  in  both  sales  book  and  ledger. 


90  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

Prove  your  cash. 

Make  out  Student's  Report  No.  8.  Do  not  fail  to  fill  out  the  spaces  for  the  bank  proof. 
Inventories,  February  28: 

Furniture  and  Fixtures,  $  380.00 

.     Merchandise,  1339.50 

Interest  accrued  on  H.  N.  Alkire's  note  of  February  7,  in  our  favor,  21 

days  at  6%,  2.74 

Interest  accrued  on  our  note  of  Feb.  21,  in  favor  of  the  Eckhart  &  Swan 

Milling  Co.,  7  days  at  6%,  1.11 

Interest  accrued  on  our  note  issued  Feb.  24,  in  favor  of  the  Pillsbury- 

Washburn  Flour  Mills  Co.,  dated  Feb.  9,  19  days  at  6%,  1.58 

The  inventory  of  interest  accrued  on  Alkire's  note  in  our  favor  is  a  resource  to  us. 
The  amounts  of  interest  accrued  on  notes  which  we  owe  are  liabilities  to  us. 

Take  a  trial  balance.  Prepare  a  financial  statement  and  a  loss  and  gain  statement. 
In  computing  the  gain  on  interest  add  the  resource  inventory  to  the  credits,  and  add  the 
liability  inventory  to  the  debits.  In  making  the  financial  statement,  remember  to  include 
these  inventories. 

Close  the  ledger  accounts.  First  close  the  financial  accounts,  except  personal  accounts 
and  the  proprietor's  account.  Then  close  the  loss  or  gain  accounts  into  the  loss  and  gain 
account.  These  will  close  with  the  results  shown  in  the  loss  and  gain  statement.  In 
closing  the  interest  account,  remember  that  it  has  a  resource  inventory  and  two  liability 
inventories.  These  must  be  entered  in  red  ink,  the  resource  with  the  gains  (credit 
side)  and  the  liabilities  with  the  losses  (debit  side).  After  the  account  is  closed  with  a 
gain,  these  inventories  must  be  brought  down  separately. 

Close  the  proprietor's  account. 

When  the  ledger  has  been  closed  as  above  described,  and  balances  and  inventories 
have  been  properly  brought  down  and  balances  of  personal  accounts  have  been  noted  in 
lead  pencil  in  the  explanatory  columns  of  the  ledger,  take  a  balance  of  balances.  This 
balance  of  balances  should  correspond  with  the  assets  and  liabilities  shown  in  the  financial 
statement. 

Prepare  a  stock  record  for  February.     Allow  lines  for  each  item  as  follows: 

Lines  Lines 

Pillsbury's  Best  flour  2  Ear  corn,  6 

Best  Baker's  Patent  flour,  2  No.  2  spring  wheat,  4 

Lincoln  flour,  3  XXXX  Best  Patent  flour,  3 

Standard  oats,  3  Bohemian  Rye  flour,  2 

First:  Enter  the  quantities  on  hand  Feb.  2,  at  the  latest  prices  paid,  as  follows: 
Pillsbury's  Best  flour,  15  brl.  at  $5.70;  Best  Baker's  Patent  flour,  20  brl.  at  $5.20;  Lincoln 
flour,  20  brl.  at  $5.40;  Standard  oats,  645  bu.  at  520;  ear  corn,  386  bu.  at  480;  No.  2  spring 
wheat,  295  bu.  at  910. 

Second :     Enter  all  quantities  purchased  in  February,  as  ascertained  from  the  invoices. 

Third:     Enter  all  quantities  sold,  as  ascertained  from  the  sales  book  items. 

Last:  Subtract  the  quantities  sold  from  the  quantities  purchased,  and  multiply  by 
the  purchase  prices.  The  total  of  this  list  should  agree  with  the  Mdse.  inventory  given 
in  the  book. 


SUPPLEMENTARY    PROBLEMS 


91 


Bill  Book  Proof.  Test  the  accuracy  of  the  bill  book  records  by  checking  the  items  in 
the  bill  book  with  those  shown  in  the  ledger.  The  items  of  notes  receivable  should  exactly 
correspond  with  the  items  on  the  debit  side  of  the  notes  receivable  account,  while  the  items 
marked  in  the  notes  receivable  book  as  disposed  of  should  all  appear  on  the  credit  side  of 
the  notes  receivable  account  in  the  ledger.  Similarly,  the  items  shown  in  the  notes  payable 
book  should  exactly  agree  with  the  credits  of  the  notes  payable  account  in  the  ledger,  and 
those  items  marked  in  the  book  as  paid  should  check  with  the  debit  side  of  the  notes  payable 
account. 

Hand  in  your  files  to  your  teacher,  who  will  examine  their  contents  and  return  the 
empty  files  to  you  to  be  used  for  your  next  month's  business. 

Supplementary  Exercises 
By   inspection  of  the  following  entries,  determine  what  was  the  transaction  in  each  case: 
Jan.  19— 

9.  Cash 

John  Smith 

10.  Mdse. 
Notes  Pay. 

11.  Notes  Rec. 
John  Smith 

Mdse. 

12.  Cash 
Notes  Rec. 
Interest 

14.  Proprietor 

Cash 
16.  Notes  Pay. 
Interest 

Cash 


1.  Cash 

Proprietor 

2.  Mdse. 

Cash 

3.  John  Smith 

Mdse. 

4.  Cash 

Mdse. 

5.  Notes  Rec. 

John  Smith 

7.  Cash 

Notes  Rec. 

8.  Notes  Rec. 

Mdse. 


17.  Real  Estate 

Notes  Pay. 

Cash 

Geo.  Brown 

18.  Mdse. 

Notes  Rec. 
Notes  Pay. 
Ed.  Gray 

19.  Geo.  Brown 

Cash 

20.  Ed.  Gray 

Mdse. 


Proprietary  Investments 

Mr.  Stewart's  investment  January  1  consisted  of  $10,100.00  in  cash.  You  debited  cash  and  credited 
D.  B.  Stewart  for  the  amount.  Had  the  investment  consisted  of  several  items,  several  accounts  would 
have  been  debited  and  Mr.  Stewart  credited  for  the  total,  thus: 


Cash 

Mdse.    .' 

Real  Estate   .... 
D.  B.  Stewart 


10,000 
5,000 
6,000 


20,000 


00 


A  proprietor  often  brings  into  the  business  liabilities  as  well  as  assets.  In  this  case,  the  separate 
liabilities  should  be  credited  to  the  proper  accounts  and  the  proprietor  debited  for  the  total.  Thus, 
if  Mr.  Stewart  had  owed  $5,000.00  on  a  note  and  had  owed  John  Jones  $5,000.00  at  the  time  of  starting 
business,  and  the  business  had  assumed  these  liabilities,  the  following  entry  would  have  been  made: 


D.  B.  Stewart   .    .    . 
Notes  Payable 
John  Jones    . 


10  000 


00 


5,000 
5.000 


00 
00 


Note. 


You  must  remember  that  you  have  not  been  keeping  the  books  of  Mr.  Stewart,  but  of  the 


92 


SUPPLEMENTARY    JOURNALIZING 


flour  and  feed  business  which  Mr.  Stewart  owned  and  conducted,  Mr.  Stewart's  entire  resources  may 
or  may  not  have  been  invested  in  this  business.  As  a  matter  of  law,  all  of  a  man's  property  is  liable 
for  the  debts  of  his  business;  but  as  a  matter  of  bookkeeping,  the  investment  consists  of  just  what  he 
puts  in  the  business.  He  may  conduct  a  number  of  businesses,  with  a  different  investment  for  each  one. 
When  a  proprietary  investment  consists  of  both  assets  and  liabilities,  sometimes  one  journal  entry 
is  made  instead  of  two.  The  assets  are  listed  as  debits,  and  the  liabilities  as  credits,  the  proprietor's 
account  being  credited  for  the  difference.  This  last  amount  appears  as  the  last  liability  in  the  list, 
making  the  assets  equal  to  the  liabilities,  in  conformity  to  the  rule  requiring  equal  debits  and  credits 
for  every  journal  entry.     Thus  the  two  entries  above  could  be  combined  in  one  entry,  as  follows: 


Cash 

Mdse 

Real  Estate  .... 
Notes  Payable 
John  Jones   .  . 
D.  B.  Stewart . 


10,000 
6,000 
5,000 


5,000 

5,000 

10,000 


It  will  be  seen  that  Mr.  Stewart's  investment,  as  shown  by  the  last  entry,  is  the  difference  between 
his  credit  shown  in  the  first  entry  and  his  debit  shown  in  the  second  entry. 

In  case  the  proprietor  makes  a  further  investment  at  any  time,  he  is  credited  with  it  by  the  business, 
just  as  the  business  would  credit  any  other  person  for  what  that  person  produced.  Should  he  make 
a  withdrawal,  he  would  be  debited  on  the  books  of  the  business,  just  as  any  other  person  would  be  debited 
who  cost  the  business  something.  If  a  private  debt  of  the  proprietor  should  be  paid  or  assumed  by  the 
business  at  any  time,  it  would  be  treated  as  a  withdrawal. 

Journalize  the  following,  using  loose  sheets  of  paper: 

19— 

Feb.  1.  Geo.  E.  Matthews  commenced  business  with  the  following:  Cash  on  hand,  $1,800.00; 
Mdse,  $3,400.00;  E.  R.  Munger's  note  for  $600.00;  John  Johnson  owes  on  account,  $150.00. 

Feb.  5.  E.  M.  Price  owed,  on  commencing  business:  E.  C.  Conway,  on  note,  $450.00;  B.  F.  Mills, 
on  account,  $180.00. 

Feb.  10.  J.  H.  Purcell  commenced  business  with  the  following  assets:  Mdse.  on  hand,  $1,800.00 
cash  in  bank,  $750.00;  store  and  lot  valued  at  $2,000.00.  His  liabilities  were :  C.  Baine,  on  note,  $400.00; 
Henry  Munson,  on  account,  $80.00. 

Debit  the  assets,  credit  the  liabilities,  and  credit  J.  H.  Purcell  with  the  difference  to  balance  the 
entry. 

Feb.  12.  J.  H.  Purcell  has  this  day  paid  in  cash  from  the  cash  register,  grocery  bill  for  family, 
amounting  to  $35.00. 

Feb.  13.  J.  N.  Parker's  assets  at  the  time  of  commencing  business,  which  he  invested  in  the  business, 
were:  Cash,  $3,500.00;  merchandise,  $4,800.00;  sundry  persons'  notes,  amounting  to  $1,250.00;  and 
an  account  against  John  D.  Cooper  for  $675.00.  His  liabilities,  which  were  assumed  by  the  business, 
were:  Outstanding  notes  amounting  to  $1,875.00,  and  an  account  due  Geo.  W.  Porter  for  $250.00. 

Feb.  15.  J.  N.  Parker  has  paid  cash  from  the  cash  register  for  new  suit  of  clothes,  for  personal  use, 
$40.00. 

Feb.  16.  Geo.  M.  Peters  commenced  business  with  cash  on  hand,  $250.00;  deposit  in  First  National 
Bank,  $1,700.00;  eight  shares  C,  B.  &  Q.  R.  R.  stock,  at  $100.00  per  share,  $800.00;  merchandise, 
$4,000.00.  He  also  invested  the  store  building  on  Main  Street,  worth  $7,000.00,  upon  which  there  was 
a  mortgage  note  of  $1,000.00,  favor  G.  Mason,  with  $25.00  interest  due  on  it.  He  owed  Geo.  Hainline, 
on  account,  $760.00,  and  this  was  assumed  by  the  business. 

The  mortgages  payable  account  is  handled  in  the  same  way  as  the  notes  payable  account. 

Feb.  17.     Geo.  M.  Peters  has  taken  from  the  cash  drawer,  for  personal  use,  $20.00. 

Feb.  18.  Geo.  M.  Peters  having  received  a  legacy  of  $360.00  in  cash  from  a  deceased  parent,  has 
invested  it  in  the  business. 


SUPPLEMENTARY   JOURNALIZING  93 

Feb.  19.  M.  L.  Smith  has  to-day  invested  in  business  as  follows:  Cash,  4,000.00;  stock  of  Mdse.» 
$5,270.00;  note  signed  by  Mead  &  Coe,  $250.00;  and  an  account  against  Geo.  Waters,  $87.50. 

Feb.  20.  G.  W.  Brown  has  to-day  begun  business.  His  investments  are:  Cash,  $2,500.00;  Mdse., 
$3,465.20;  store  and  lot,  valued  at  $5,500.00;  and  an  account  against  Jos.  Leiter,  $149.65.  His  debts, 
which  are  assumed  by  the  business,  are:  His  note  in  favor  A.  L.  Hill,  $500.00;  an  account  due  G.  M. 
Wilcox,  $240.00. 

Feb.  21.  H.  L.  Gray  begins  business  to-day  with  the  following  investments:  Cash,  $1,400.00; 
note  signed  by  R.  H.  Perkins,  $100.00;  interest  accrued  on  foregoing  note  amounting  to  $4.33.  He 
owes  Henry  Patterson,  on  account,  $100.00;  he  owes  S.  K.  Willis,  on  note,  $450.00;  interest  accrued  on 
foregoing  note  for  two  months  at  6%,  $4.50. 

Feb.  22.  B.  C.  Dalton  and  E.  F.  Gaines  have  to-day  engaged  in  business  as  partners.  Mr.  Dalton 
invests:  Cash,  $245.65;  Mdse.,  $6,540.26;  store  and  lot  worth  $4,000.00;  furniture  and  fixtures  valued 
at  $325.00.  He  owes  Newman  &  Co.  $650.00,  on  account,  and  has  signed  a  note  in  favor  of  Strickland 
&  Co.  for  $650.00,  on  which  interest  to  the  amount  of  $7.90  has  accumulated.  Mr.  Gaines  brings  into 
the  business:  Cash,  $4,500.00;  an  account  against  James  Ford  for  $720.65;  and  a  note  signed  by  Waller 
&  Co.  for  $2,000.00,  on  which  interest  has  accrued  for  one  year  at  5%.  Make  separate  entries  for  the 
two  partners. 

Feb.  23.  Settled  our  account  with  Jarvis  &  Whitman.  Amount  due  them,  $1,260.00.  Gave 
them  a  note  which  we  hold  against  R.  W.  Munger  for  $500.00,  on  which  $10.00  interest  has  accrued; 
our  own  note  for  $400.00;   and  cash  for  the  balance. 

Feb.  24.  Received  from  P.  M.  King,  in  settlement  of  his  account  of  $350.00,  the  following  items: 
One  second-hand  typewriter,  $50.00;  an  account  of  $50.00  against  Belknap  &  Co.,  which  he  transfers 
to  us;  a  note  against  E.  B.  Hamilton,  $150.00  plus  interest  for  six  months  at  6%;  and  cash  for  the 
balance. 

Feb.  25.  Bought  from  K.  V.  Handley,  Mdse.  amounting  to  $500.00.  Gave  him  in  exchange  a 
note  signed  by  C.  C.  McLain  for  $250.00,  and  an  account  against  E.  M.  Goltra  for  $250.00. 

Feb.  26.  Parker  Doane,  of  Jacksonville,  111.,  owes  us  $100.00.  We  owe  Henry  English,  of  Jackson- 
ville, 111.,  the  same  amount.  We  write  an  order  on  Parker  Doane  for  $100.00,  payable  to  Henry  English, 
and  send  the  order  to  English,  When  Doane  pays  English  the  $100.00,  Doane's  debt  to  us  is  settled. 
Make  the  entry. 

Feb.  27.  A  bank  collector  calls  upon  us  to-day,  presenting  an  order  from  H,  M,  Wright  for  $150.00. 
We  ascertain  from  our  books  that  we  owe  Wright  $150.00,  and  pay  the  $150.00  in  cash  to  the  bank 
collector.     Make  the  journal  entry  just  as  if  we  had  paid  the  cash  to  Mr.  Wright  direct. 

Feb.  28.  We  owe  Fullenweider  &  Co.  $180.00.  They  send  a  representative  to  call  upon  us,  who 
produces  a  note  promising  to  pay  Fullenweider  &  Co.,  $180.00,  which  he  asks  us  to  sign.  We  sign  the 
note  and  deliver  it  to  him.     Make  the  entry. 

Review  Questions.  1.  What  class  of  transactions  are  entered  in  the  sales  book?  2.  Describe 
the  sales  book  as  to  form.  3.  How  is  the  sales  book  posted  from?  4.  Show  how  the  principle  of  equal 
debit  and  credit  is  preserved  in  posting  from  the  sales  book.  5,  How  is  the  labor  of  posting  lessened 
by  the  use  of  the  sales  book?  6.  What  other  advantages  does  the  use  of  a  sales  book  present?  7.  When 
a  sales  book  and  journal  are  kept,  which  should  be  posted  from  first?  Why?  8.  Assume  that  a  regular 
customer  buys  Mdse  for  cash.  "What  entries  will  be  made?  9.  In  the  foregoing  case,  could  the  trans- 
action have  been  disposed  of  by  one  entry?  WTiy  would  this  have  been  less  satisfactory?  10.  What 
is  the  purpose  of  the  Notes  Receivable  book?  Describe  the  book.  WTiat  would  you  call  its  most  impor- 
tant feature?  11.  Answer  the  foregoing  questions  as  to  the  Notes  Payable  book.  12.  Are  the  bill  books 
books  of  original  entry?  Of  final  entry?  If  neither  of  these,  what  are  they?  Why?  13.  How  should 
the  accuracy  of  the  bill  books  be  tested?  14.  How  should  a  depositor  proceed  to  withdraw  cash  from 
bis  bank  account? 

EQUALITY  OF  DEBIT  AND  CREDIT 

How  much  is  a  man  worth?  Mr.  Black  has  $1000.00  in  cash.  He  owns  nothing  else  and  owes  nothing. 
This  is  the  simplest  case  imaginable,  and  we  say 

$1000.00  ="\Miat  Mr.  Black  is  worth. 

Problem  1.  A  has  $86.75  in  his  cash  register  and  $500.00  on  deposit  at  the  bank.  He  owns  nothing 
else  and  owes  nothing.     How  much  is  he  worth? 

Problem  2.  B  has  $50.75  in  his  cash  drawer,  $226.65  on  deposit  at  the  First  National  Bank,  and 
$500.00  deposited  in  the  savings  bank.     He  owns  nothing  else  and  owes  nothing.     How  much  is  he  worth? 


94  EQUALITY    OF    DEBIT    AND    CREDIT 

In  bookkeeping  we  deal  with  the  affairs  of  a  business,  not  a  man.  Mr.  Black  may  have  part  of  his 
thousand  dollars  invested  in  one  business  and  part  in  another.  Let  us  assume  that  he  has  $500.00  invested 
in  a  certain  business.     This  case  is  also  simple,  and  we  say 

$500.00  cash  =  Mr.  Black's  investment  in  the  business,  $500.00. 

It  is  not  necessary  that  an  investment  be  entirely  cash.  It  may  consist  of  or  include  anything  of 
value  which  the  proprietor  owns  and  wishes  to  put  into  the  business.  Suppose  that  Mr.  Black  had  put 
into  the  business  a  stock  of  merchandise  worth  $200.00,  furniture  and  fixtures  worth  $100.00,  a  note  against 
Mr.  Brown  for  $100.00,  and  only  $100.00  in  cash.  His  investment  would  have  been  just  the  same  as  in 
the  preceding  illustration,  but  would  have  been  expressed  thus: 

Cash,  $100,00  1 

Mdse.,  $200.00  iv/r      Ul      1  -     •  *  *    ecnn  nn 

Furn.  &  Fix.,         $100.00      =^^-  ^'^^^  «  investment,  $500.00. 
Notes  Rec,  $100.00  J 

Problem  3.  C  invests  $225.00  in  cash,  Mdse.  worth  $526.70,  furniture  and  fixtures  which  he  values 
at  $175.00,  and  an  account  against  X  for  $120.60.  Ho  owns  nothing  else  and  owes  nothing.  How  much 
is  the  business  worth?     Prepare  your  statement  in  the  form  shown  above. 

Problem  4.  D  has  $96.50  in  his  cash  register  and  $452.60  on  deposit  at  the  bank.  He  owns  a  store 
and  lot  valued  at  $8600.00,  Mdse.  inventoried  at  $2346.75,  and  fixtures  valued  at  $236.50.  He  holds  a 
note  against  X  for  $100.00,  and  an  account  against  Z  for  $76.90.  He  owns  nothing  else  and  owes  nothing. 
If  this  is  all  invested  in  a  business,  how  much  is  the  business  worth? 

It  will  be  noted  that  the  total  of  the  items  on  the  left-hand  side  in  the  illustration  above  are  exactly 
equal  to  the  amount  of  Mr.  Black's  investment,  as  shown  at  the  right.  If  a  journal  entry  were  made, 
the  four  items  on  the  left  would  be  entered  as  debits  and  the  amount  of  Mr.  Black's  investment  would  be 
entered  as  a  credit.     State  the  reason  in  each  case. 

If  such  a  journal  entry  were  made  and  posted,  the  four  items  on  the  left,  showing  as  debits  in  the 
journal  entry,  would  be  posted  to  the  left-hand  or  debit  side  of  the  ledger.  Similarly  the  item  on  the 
right,  showing  as  a  credit- in  the  journal  entry,  would  be  posted  to  the  right-hand  or  credit  side  of  the  ledger. 
It  is  apparent  that  there  would  then  be  $500.00  on  the  debit  side  of  the  ledger  and  $500.00  on  the  credit 
side  of  the  ledger.  This  equality  between  the  debit  and  credit  sides  of  the  ledger  is  always  maintained 
to  the  cent.     To  further  illustrate  this  point,  let  us  again  take  up  Mr.  Black's  business. 

As  Mr.  Black's  ledger  now  stands  the  debit  and  credit  sides  are  exactly  equal,  as  follows: 

Debit  Side         Credit  Side 
$500.00      =     $500.00 

Suppose  that  Mdse.  is  sold  for  cash,  $100.00.  The  journal  entry  for  this  transaction  would  debit  cash 
$100.00  and  credit  Mdse.  $100.00.  This  debit  and  credit  would  be  posted  to  the  ledger,  without  disturb- 
ing the  equality  of  the  debit  and  credit  sides,  as  the  following  will  show: 

Debit  Side         Credit  Side 

$500.00 $500.00 

100.00 100.00 

$600.00 $600.00 

Assuming  that  other  transactions  take  place  as  noted  below,  trace  the  effect  of  each  transaction  upon 
the  ledger,  particularly  noting  that  since  the  debit  side  and  the  credit  side  are  increased  by  the  same  amounts 
each  time,  the  equality  between  the  two  sides  is  not  disturbed. 

Transactions  Journal  Entry  Ledger 

Debit  Side      Credit 
$500.00         $500.00 
100.00  100.00 


$600.00         $600.00 
Bought  Mdse.  for  cash,  $50.00  Dr.  Mdse.,  $50.00,  Cr.  Cash,  $50.00  50.00  50.00 


$650.00         $650.00 
Sold  Mdse.  to  Geo.  Green  on  acct.  $75.00    Dr.  Geo.  Green,  $75.00,  Cr.  Mdse.,  $75.00         75.00  75.00 


$725.00    $725.00 

Rec'd  cash  $101.00,  for  note,  $100.00,         Dr.  Cash  $101.00,  Cr.  Notes  Rec.  $100.00,       101 .00  100.00 

and  Int.  $1.00  Cr.  Int.  $1.00  1.00 


$826.00         $826.00 

And  so  this  exercise  might  be  continued  indefinitely  without  disturbing  the  equality  between  the  two 
sides  of  the  ledger.  The  original  investment  consists  of  equal  debits  and  credits,  so  that  the  footings  of 
the  ledger  are  equal  to  start  with.  Every  transaction  consists  of  equal  debits  and  credits.  The  two  sides 
of  the  ledger  are  therefore  increased  equally  for  each  transaction,  leaving  the  total  footings  equal  at  all  times. 


THE    CASH   BOOK 

This  section  is  to  be  thoroughly  mastered  before  the  work  of  Chapter  IV  is  attempted. 

At  the  beginning  of  your  study  of  this  text  you  learned  that  books  were  classified 
as  to  the  nature  of  the  entries  made  in  them  into  books  of  original  entry,  books  of  sub- 
sequent or  final  entry,  and  auxiliary  or  memorandum  books. 

The  first  book  of  original  entry  you  used  was  the  journal.  All  debits  and  credits 
were  entered  in  this  book,  as  you  first  used  it.  You  next  learned  the  use  of  the  sales 
book.  You  were  taught  to  enter  all  sales  of  merchandise  in  this  book,  omitting  these 
transactions  from  the  journal.  You  will  now  learn  to  use  the  Cash  Book.  All  trans- 
actions involving  debits  and  credits  of  cash  are  entered  in  the  cash  book  at  the  time  of 
their  occurrence  and  are  omitted  from  the  journal. 

When  cash  is  received  an  entry  is  made  on  the  debit  side  of  the  cash  book  at  once. 
The  name  of  the  account  which  should  be  credited  is  entered  in  the  explanatory  column, 
and  the  entry  is  later  posted  to  the  credit  of  that  account  in  the  ledger. 

When  cash  is  paid  out,  an  entry  is  made  on  the  credit  side  of  the  cash  book  at  onco. 
The  name  of  the  account  to  be  debited  in  the  same  transaction  is  written  in  the  ex- 
planatory column  and  the  entry  is  later  posted  to  the  debit  of  that  account  in  the  ledger. 

Since  the  debits  of  cash  are  posted  to  the  credit  side  of  the  ledger  and  the  credits 
of  cash  are  posted  to  the  debit  side  of  the  ledger,  it  follows  that  if  total  debits  and  total 
credits  of  the  cash  book  be  included  in  the  trial  balance  the  rule  of  equal  debits  and 
credits  will  have  been  preserved.  In  practice,  the  debit  and  credit  totals  are  not  entered 
in  the  trial  balance,  but  the  excess  of  the  debit  over  the  credit  side  is  entered  as  a  single  item. 

The  preceding  three  paragraphs  may  not  seem  perfectly  clear  to  you.  Study  carefully  the  illus- 
trative exercise,  illustration,  and  explanation  which  follow;  then  return  to  the  three  paragraphs  referred 
to,  and  their  meaning  will  be  clear. 

Illustrative  Exercise: 

19— 

Jan.    1.  H.  T.  Patten  invested  cash  in  the  business,  $4,000.00. 

2.  Paid  for  rent  of  store  for  January,  $80.00. 

3.  Gave  J.  E.  Thompson  our  check  for  goods  bought  yesterday,  $1,000.00. 

4.  Received  from  E.  B.  Dorsey  cash  on  account,  $175.50. 

5.  Paid  the  clerk's  salary  for  the  week  in  cash,  $12.00. 

7.  Received  F.  R.  Hoppe's  check  for  Mdse.  sold  him  Jan.  4,  $125.00. 

8.  Paid  the  janitor's  wages,  $7.50. 

9.  Received  cash  from  G.  M.  Baker  for  his  note  of  Jan.  4  in  our  favor,  $250.00. 
10.  Paid  cash  to  J.  B.  Williams  on  account,  $85.00. 

12.     Paid  cash  to  E.  D.  Woods  for  our  note  in  his  favor,  dated  Dec,  28,  19 — , 

$200.00,  and  interest  for  15  days  at  6%,  .50  (two  entries). 
15.     Bought  a  Hosier  safe  for  $150.00  cash. 

Explanation  :       (See  form  on  pages  88  and  89) 

The  cash  book  extends  across  two  pages,  a  left  and  a  right.  These  two  pages  are  used  in  the  same 
way  as  the  two  sides  of  a  ledger  account;  i.  e.,  the  left-hand  page  is  for  the  debits  and  the  right-hand 
page  is  for  the  credits.  Note  that  the  left-hand  page  and  the  right-hand  page  bear  the  same  page 
number. 

95 


06 


THE    CASH    BOOK 


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At  the  top  of  each  column  in  the  illustration  the  purpose  of  the  column  is  stated,  in  parenthesis. 
Trace  the  entries  from  the  illustrative  exercise  to  the  illustration  (twelve  entries)  and  then  make  them 
on  a  double  sheet  of  paper,  without  reference  to  the  illustration.  Do  not  rule  up  or  attempt  to  balance 
the  cash  book  until  instructed  to  do  so. 

If  the  four  entries  on  the  debit  side  of  the  cash  book  were  each  journalized,  they  would  be  as 
follows: 

January  1,  19 — 


Cash 

H.  T.  Patten 
4 

4,000 

00 

4,000 

00 

Cash 

E.  B.  Dorsey 
7 

176 

50 

175 

50 

Cash 

F.  R.  Hoppe 
9 

125 

00 

125 

00 

Casb 

Notes  Rec. 

250 

00 

250 

00 

THE    CASH    BOOK 


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Note  that  cash  has  been  debited  each  time.     If  these  were  condensed  into  one  entry,  that  entry 
would  be: 


Cash 

H.  T    Patten 

E.  B.  Dorsey 

F.  R.  Hoppe 
Notes  Rec- 

4,550 

50 

4,000 
175 
125 
250 

00 
50 
00 
00 

It  is  apparent  that  if  the  four  items  be  separately  posted  from  the  cash  book  to  the  credit  side  of 
the  ledger  and  the  total  appear  in  the  trial  balance  as  a  debit  of  cash,  the  rule  of  equal  debits  and  credits 
will  have  been  observed,  and  the  condition  of  the  ledger  after  this  posting  has  been  done  will  be  the 
same  as  if  the  transactions  had  been  handled  through  the  journal.  For  the  purposes  of  taking  a  trial 
balance,  however,  the  footing  need  not  be  actually  posted  to  the  ledger,  provided  it  be  included  in  the 
trial  balance. 

If  you  will  study  again  the  third,  fourth  and  fifth  paragraphs  of  this  section  they  should  now  be 
perfectly  clear  to  you. 

Journalize  the  separate  entries  on  the  credit  side  of  the  cash  book  as  shown  above 
for  the  debit  side.     Condense  these  separate  entries  into  a  single  entry. 


98  the  cash  book 

Closing  the  Cash  Book, 

The  cash  book  is  balanced  as  follows:  The  Items  column  is  ruled  up  on  each  side, 
and  added,  the  total  being  placed  in  the  Total  column  on  the  first  blank  line.  The 
balance  is  ascertained  and  written  on  the  credit  side  just  below  the  total  of  payments. 
It  is  dated  as  of  the  last  business  day.  A  single  line  is  ruled  just  below  and  across  the 
Total  column  only.  On  the  same  line  with  this,  a  single  line  is  ruled  across  the  Total 
column  of  the  debit  side.  (If  the  debit  side  should  have  more  items  than  the  credit 
side,  this  line  would  be  ruled  just  beneath  the  total  on  the  debit  side,  and  the  ruling  on 
the  credit  side  would  be  made  just  opposite  it,  a  few  lines  being  left  blank  on  the  credit 
side.) 

The  total  of  the  debit  side  is  then  brought  down  beneath  the  last  line  ruled,  and 
on  the  credit  side  the  balance  is  added  to  the  total  and  their  sum  is  written  beneath 
the  line.  The  debit  and  credit  footings  are  now  equal.  A  double  line  is  ruled  under 
the  footings,  extending  across  all  but  the  explanatory  columns,  and  the  balance  is  brought 
down  on  the  debit  side,  in  the  Total  column.  The  balance  thus  brought  down  is  dated  as 
of  the  next  business  day.  The  next  time  the  book  is  balanced  the  balance  must  be  added 
to  the  total  receipts  to  give  the  debit  footing. 

The  final  resvilt  would  be  the  same  even  if  the  balance  were  brought  down  into  the  wrong  column 
on  the  debit  side.  But  if  the  balance  were  brought  down  into  the  Items  column  it  would  be  added 
into  the  footing  of  that  column.  The  footing  would  then  not  represent  the  total  of  receipts  since  the 
last  closing  only,  as  it  should.  It  is  particularly  important  that  the  receipts  should  be  shown  as  sep- 
arate from  the  previous  balance  when  a  cash  account  is  kept  in  the  ledger  to  which  footings  are  posted, 
as  is  sometimes  the  case;  for  if  the  total  posted  should  include  anything  besides  the  items  for  which 
credits  have  been  passed  to  the  ledger,  the  ledger  would  be  thrown  out  of  balance. 

Exercises  on  the  Cash  Book 
exebcise  i 

Write  a  cash  book  for  the  following  transactions: 

19— 

Feb.    1.  E.  S.  Conway  invested  in  business  cash,  $3,500.00. 

2.  Paid  Jacob  Reis  &  Co.  $850.50  for  Mdse.  bought  Feb.  1. 

3.  Paid  rent  for  February  in  cash,  $50.00. 

4.  Received  J.  E.  Baker's  check  for  $45.17  for  Mdse.  sold  him  on  the  2d  inst. 

5.  Bought  an  office  desk  and  chair  for  $23.75  in  cash, 

6.  Paid  the  clerk's  salary  for  the  week,  $8.50. 

8.  Received  $147.63  in  cash  from  M.  W.  Hopper  for  Mdse.  sold  him  vesterday. 

9.  Received  from  J.  E.  Baker  on  account,  $10.00. 

10.  Redeemed  our  note  in  favor  of  L.  E.  Rockwell.     Face  of  note,  $100.00. 

Interest  accrued,  15  days  at  6%,  25c.  (Make  two  entries  on  the  credit 
side  of  the  cash  book,  the  first  debiting  Notes  Payable,  the  second  debit- 
ing Interest.) 

11.  Received  a  check  from  M.  W.  Hopper  for  $27.50  in  payment  for  Mdse. 

invoiced  to  him  on  Feb.  8. 

12.  E.  W.  Wilson's  note  in  our  favor  fell  due  this  day.     Received  cash  for 

the  note,  $57.50,  and  interest,  20c.  (Two  entries,  as  in  transaction  on 
Feb.  10.) 


THE   CASH   BOOK  99 

Feb.  13.     Gave  Jacob  Reis  &  Co.,  our  check  for  $140.00  for  Mdse.  bought  of  them 
on  Feb.  11. 
13.     Paid  the  salary  of  the  clerk  as  on  Feb.  6. 

Post  the  entries  to  the  ledger,  using  as  an  explanation  the  initial  C.  Put  five  accounts 
on  each  page. 

Take  a  trial  balance,  which  must  include  the  balance  of  the  cash  book.  When  the 
trial  balance  has  been  approved,  close  your  cash  book. 

EXERCISE  II 

Work  out  the  following  set  without  business  papers. 
Books  used:    Journal,  cash  book,  sales  book  and  ledger. 

Open  the  following  accounts  in  the  ledger,  in  the  order  named.  Give  each  account 
one  line  for  the  heading,  one  line  for  the  top  ruling,  and  the  number  of  lines  indicated. 

C.  B.  Brammer,  8  lines;  Furniture  &  Fixtures,  8  lines;  Mdse.,  14  lines;  Interest,  6  lines;  Expense,  11 
lines;  Loss  &  Gain,  6  lines;  Notes  Rec,  6  lines;  W.  H.  Henry,  7  lines;  M.  J.  Morrissey,  9  lines;  J.  E.  Allen, 
7  lines;  G.  W.  McHenry,  6  lines;  Notes  Payable,  5  lines;  W.  T.  Smith  &  Son,  6  lines;  Marshall  Field  &  Co., 
5  lines;  Farr  &  Bailey,  6  lines;  Roxbury  Tapestry  Co.,  6  lines. 

In  opening  ledger  accounts,  it  is  customary  to  observe  some  regular  arrangement,  which  in  this  case 
is  as  follows:  The  proprietary  account  or  accounts,  loss  or  gain  accounts,  notes  and  accounts  receivable, 
notes  and  accounts  payable.  The  reason  for  this  is  apparent,  as  the  accounts  on  the  first  pages  of  the 
ledger  under  this  arrangement  are  those  more  permanent  in  their  nature,  while  the  accounts  receivable 
and  payable  are  subject  to  constant  change.  Often,  however,  the  loss  or  gain  accounts  are  placed  between 
the  receivable  and  payable  accounts.     Sometimes  the  proprietary  accoimts  are  put  last. 

Transactions 

19— 

March  1.  C.  D.  Brammer  has  engaged  in  business  at  1260  State  St.,  Chicago,  111., 
with  a  cash  capital  of  $3,750.00. 

March  1.  Bought  furniture  and  fixtures  for  the  office  and  storeroom,  $120.00, 
paying  for  them  in  cash. 

March  1 .     Paid  rent  for  March  in  cash,  $75.00. 

March  2.  Opened  an  account  with  W.  T.  Smith  &  Son,  textile  manufacturers, 
Philadelphia,  Pa.  Bought  of  them  on  credit  12  Axminster  rugs,  at  $10.00  each;  and  15 
oriental  rugs,  at  $15.25.  (Make  an  entry  in  the  journal.)  Paid  freight  in  cash,  $10.75. 
(Debit  Mdse.) 

It  is  a  matter  of  some  contention  among  bookkeepers  whether  to  charge  freight  to  Mdse.  or  to  Ex- 
pense. The  usxial  rule  is  to  debit  Mdse.  with  such  items,  on  the  theory  that  the  cost  of  merchandise 
Ls  the  amount  the  proprietor  must  part  with  in  order  to  get  the  goods  into  the  storeroom;  this  would 
include  freight  charges.  Some  bookkeepers,  however,  prefer  to  charge  Mdse.  with  only  its  net  cost, 
charging  freight  to  Expense,  or,  if  it  seems  desirable  to  keep  a  record  of  the  exact  cost  of  freight,  charg- 
ing it  to  a  special  account  called  Freight.  When  no  account  is  kept  with  Freight,  freight  items  must  be 
charged  to  either  Mdse.  or  Expense.     You  will  debit  Mdse.  as  above  instructed. 

March  3.  Sold  to  W.  H.  Henry,  1264  Harvard  Ave.,  for  cash,  1  Axminster  rug, 
$15.00,  and  one  oriental  rug,  $20.75. 

Charge  \V.  H.  Henry  in  the  sales  book  for  the  goods  he  purchased,  and  give  him  credit  through  the 
cash  book  for  the  amount  of  his  payment.  These  items  when  posted  will  balance  each  other,  but  the 
entire  transaction  will  then  show  in  the  ledger. 

March  4.     Bought  of  Marshall  Field  &  Co.,  124  Fifth  Ave.,  City,  250  yds.  Jap  matting, 


100  THE    CASH    BOOK 

at  173^c  per  yard.  Paid  the  bill  in  cash.  (Make  two  entries,  one  in  the  journal,  and  one 
in  the  cash  book.) 

March  5.  Sold  to  M.  J.  Morrissey,  Austin,  111.,  on  account,  2  Axminster  rugs,  $14.50 
and  $17.00;  and  26  yds.  Jap  matting  at  28c  per  yd. 

March  6.     Paid  the  bookkeeper's  salary  in  cash,  $12.50. 

March  8.  Sold  to  W.  H.  Henry  on  his  15-day  note  bearing  6%  interest,  3  oriental 
rugs  at  $20.00,  $21.00,  and  $22.00  respectively;  and  75  yards  Jap  matting,  at  27c. 
(Make  the  charge  through  the  sales  book.     Give  credit  through  the  journal.) 

March  9.  Bought  of  Farr  &  Bailey,  629  La  Salle  St.,  City,  on  account,  75  yds. 
linoleum,   4   yds.   wide,   300   sq.    yds.,    at  32c    per  sq.  yd. 

March  10.  Sold  to  J.  E.  Allen,  6250  Cottage  Grove  Ave.,  on  account,  48  yds.  Jap 
matting  at  28c;  and  20  sq.  yds.  linoleum,  at  45c. 

March  11.  Sold  to  M.  J.  Morrissey  for  cash,  6  rugs,  at  $15.00,  $17.00,  $17.50,  $18.00, 
$19.00  and  $22.50  respectively;  and  100  sq.  yds.  of  linoleum  at  423^c.  (Make  two  entries 
as  in  the  transaction  on  Mar.  3.) 

March  12.  Bought  of  the  Roxbury  Tapestry  Co.,  Roxbury,  Mass.,  3  dozen  assorted 
velvet  rugs,  at  an  average  price  of  $18.75  each;  and  1  doz.  9x12  Royal  Wilton  velvet 
rugs,  at  $33.00  each.  Gave  them  our  note  at  30  days  without  interest  for  the  amount  of 
the  invoice.     (Make  two  entries,  both  in  the  journal.)     Paid  the  freight  in  cash,  $16.50. 

March  13.     Paid  the  bookkeeper's  salary  in  cash,  $12.50. 

March  15.  Sold  to  W.  H.  Henry  for  cash  three  velvet  rugs,  at  $26.50  each.  (Two 
entries.) 

March  16.  Sold  to  M.  J.  Morrissey  on  account  20  sq.  yds.  of  linoleum,  at  45c.  Mr. 
Morrissey  paid  cash  to  be  applied  on  his  bill  of  Mar.  5,  $15.00. 

March  17.  Sold  to  G.  W.  McHenry,  26  Clarendon  Court,  on  his  6%  note  at  ten  days, 
3  Royal  Wilton  velvet  rugs  at  $45.00  each,  and  26  yds.  Jap  matting,  at  28c.  (Sales  book 
and  journal.) 

March  18.  Bought  of  W.  T.  Smith  &  Son,  4  dozen  Axminster  rugs,  at  $10.50  each; 
and  2^j  doz.  oriental  rugs  at  $15.00  each.  Remitted  them  cash  for  the  bill  bought  of 
them  on  March  2. 

March  18.     Paid  freight  on  the  shipment  from  W.  T.  Smith  &  Son,  $17.65. 

March  20.     Paid  the  bookkeeper's  salary  for  the  week,  as  on  March  13. 

March  21.     Sold  to  M.  J.  Morrissey  for  cash,  4  velvet  rugs,  at  $30.00  each. 

March  22.     Received  from  J.  E.  Allen  $10.00,  to  be  applied  on  his  account. 

March  23.     W.  H.  Henry  paid  in  cash  for  his  note  of  the  8th  inst.  and  interest. 

March  25.  Bought  of  Farr  &  Bailey  on  account,  300  yds.  of  linoleum  2  yds.  wide, 
at  333^c  per  sq.  yd. 

March  26.  M.  J.  Morrissey  paid  us  in  cash  enough  to  settle  our  invoice  of  March 
5  in  full.     (He  had  already  paid  $15.00  on  the  bill  on  March  16.) 

March  27.     G.  W.  McHenry  paid  in  cash  for  his  note  dated  March  17  and  interest. 

March  27.     Paid  the  bookkeeper's  salary  as  before. 

March  29.     J.  E.  Allen  paid  his  account  in  full. 

Inspect  the  sales  book  to  see  what  sales  have  been  made  to  him.  Inspect  the  cash  book  and  journal 
to  see  what  has  been  passed  to  his  credit. 

March  30.     Remitted  $150.00  to  Farr  &  Bailey  to  be  applied  on  account. 


THE   CASH    BOOK 


XQl 


March  31.  The  drayman  presented  his  bill  for  deliveries  for  the  month  and  we  paid 
it  in  cash,  $11.65.     (Expense.) 

Post  the  sales  book,  journal,  and  cash  book,  in  the  order  named. 

Take  a  trial  balance,  leaving  out  accounts  that  balance.  Do  not  fail  to  include  the 
balance  of  the  cash  book. 

Leaving  out  of  the  trial  balance  accounts  that  have  equal  footings  on  both  sides  or  omitting  equal 
amounts  from  the  debit  and  credit  sides  of  any  accoimt,  is  permissible,  since  equal  amounts  can  be  deducted 
from  both  sides  without  destroying  the  balance. 

Inventories : 

Mdse.  on  hand,  $2,436.71 

Furniture  and  fixtures  valued  at  11500 

Salary  due  bookkeeper  (Liability  inventory  to  Expense)    7.14 

Make  statements.  Rule  up  the  sales  book.  Close  the  cash  book,  remembering  to 
bring  down  the  balance  into  the  Total  column  on  the  debit  side.  Close  the  ledger  accounts 
in  the  following  order:  (1)  Notes  Receivable;  (2)  Loss  or  Gain  accounts;  (3)  The 
proprietor's  account. 

It  is  proper  to  rule  up  a  personal  account  that  balances,  whenever  an  entry  is  posted  which  balances 
it.  This  simply  takes  ofif  equal  amounts  from  both  sides  of  the  account  and  does  not  affect  the 
equilibrium  of  the  ledger.  It  makes  it  easier  to  examine  the  account  at  any  time  and  reduces  the 
labor  of  preparing  the  trial  balance.  In  case  there  is  only  one  item  on  each  side  of  an  account  so  ruled  up, 
it  is  of  course  unnecessary  to  go  through  the  farce  of  p>erforming  an  addition — omit  the  single  line  and 
footing,  using  the  double  ruling  only. 

In  making  financial  statements  it  Ls  customary  to  arrange  the  items  in  a  definite  order.  The  assets 
are  listed  in  the  order  of  their  realization  (availability);  that  is,  those  most  quickly  and  easily  converted 
into  cash  are  listed  first.  For  the  assets  in  the  financial  statement  called  for  above,  the  arrangement 
should  be:  Cash,  Mdse.,  Furniture  &  Fixtures,  and  personal  accovmts  receivable.  The  liabilities  are 
arranged  in  the  order  of  liquidation  (pajTnent),  the  most  pressing  first.  In  this  case,  the  salary  due 
the  bookkeeper  would  be  paid  first  if  the  business  should  go  into  a  receiver's  hands,  and  it  therefore 
comes  first.  Liabilities  for  which  notes  have  been  given  are  considered  more  pressing  than  liabili- 
ties on  open  account,  since  notes  specify  a  day  of  payment,  and  therefore  notes  payable  come  next 
on  the  list.     Accovmts  payable  come  last. 

Legal  Point,  The  Statute  of  Limitations  declares  that  an  open  accoimt  is  outlawed  after  *  years 
have  elapsed  during  which  time  no  part  of  it  has  been  paid,  no  acknowledgment  of  the  obligation  made 
by  the  debtor,  and  no  legal  steps  for  collection  taken  by  the  creditor.  In  the  case  of  promissory  notes, 
however,  t  years  must  elapse  under  the  same  conditions  before  the  debt  is  outlawed.  In  most  states, 
notes  are  good  for  a  longer  time  than  open  accounts.  I'his  seems  to  be  a  recognition  of  the  superiority 
of  the  note  as  an  evidence  of  debt,  and  might  furnish  one  reason  why  notes  should  be  listed  before 
personal  accoimts. 


STATE 


f 


t 


Ala. 


Ariz 

Ark 

Cal 

Colo 

Conn 

Del 

D.  C 

Fla 

Ga 

Idaho 4 

111 5 

Ind e 


6       Iowa 5     10       Neb. 


4  Kan 

5  Ky 

4  La 

6  Me 

6       Md 

6       Mass 

3       Mich 

5  Minn 6 

6  Miss 3 

5       Mo 5 

10       Mont 5 

10 


5 
5 
5 
6 
3 
6 
6 
6 
6 
10 


Nev 4 

N.  H 6 

N.  J 6 

N.  Mex 4 

N.  Y 6 

N.  Car 3 

N.  Dak 6 


Ohio 
Okla. 
Ore.. 
Pa... 


t 
5 
6 
6 
6 
6 
6 
3 
6 
15 
5 
6 
6 


STATU 


R.I. 


S.  Car 6 

S.  Dak 6 

Tenn 6 

Tex 2 

Utah 4 

Vt 6 

Va 2 

Wash 3 

W.  Va 5 

Wis 6 

Wyo 8 


6 
6 
G 
4 
6 
6 
5 
6 
10 
6 
5 


CHAPTER  IV 
PRACTICAL  OFFICE  WORK  AND  BOOKKEEPING-Continued 

THE  FURNITURE  BUSINESS 

BUSINESS  FOR  MARCH,  19— 

During  the  past  two  months  Mr.  Stewart's  profits  have  only  been  about  $175.00  per 
month.  This  is  not  as  much  profit  as  he  should  have  received  from  an  investment  of 
over  $10,000.00  in  cash  and  of  his  entire  time  and  effort. 

He  decides  to  retrench  on  expenses.  His  heaviest  expense,  aside  from  his  rent, 
is  the  salary  he  has  been  paying  you.  He  decides  to  do  his  own  bookkeeping  in  future, 
and  therefore  lets  you  go,  giving  you  a  letter  of  recommendation  which  reads  as  follows: 

CHICAGO,  Feb.  28,  19 — .     To  whom  it  may  Concern:     It  gives  me  pleasure  to   recommend 

(Your  name) ^^   ^   thorough   and   competent   bookkeeper   and   cashier. 

M f Your  name) j^^^^  been  in  my  employ  for  the  past  two  months  and  has  given  the 

highest  satisfaction.     (He  or  she)  is  only  leaving  me  because  I  no  longer  find  it  necessary  to  employ  a 
bookkeeper.     Respectfully,  D.  B.  Stewart. 

Question:  What  would  Mr.  Stewart's  profits  for  February  have  amounted  to  if  he  had  not  paid 
you  $80.00  as  salary? 

Write  a  letter  to  H.  T.  Raynor,  furniture  dealer  at  364  Wabash  Ave.,  City,  applying 
for  a  position  as  bookkeeper  in  his  office.  You  have  seen  his  advertisement  in  yester- 
day's Record-Herald.  Tell  him  where  you  have  been  working  and  why  you  are  leaving 
Mr.  Stewart's  employ.  Enclose  a  copy  of  Mr.  Stewart's  recommendation,  properly  ar- 
ranged as  to  margins,  spacing,  etc.,  at  the  top  of  which  you  have  written  the  word  "copy." 
Request  the  privilege  of  a  personal  interview. 

Mr.  Raynor  will  not  return  the  copy  of  Mr.  Stewart's  letter  of  recommendation,  If  you  had  sent 
him  the  original  of  Mr.  Stewart's  letter,  it  would  have  been  proper  for  you  to  ask  for  its  return,  provided 
you  had  inclosed  a  two-cent  stamp  for  the  purpose. 

Opening  a  Set  of  Books 

March  2.  You  are  employed  by  Mr.  Raynor  as  bookkeeper  and  cashier  at  a  salary 
of  $20.00  per  week,  the  same  as  you  have  been  receiving  from  Mr.  Stewart. 

Mr.  Raynor  has  not  been  satisfied  with  the  system  of  bookkeeping  he  has  been  using 
and  has  decided  to  install  a  set  of  books  similar  to  those  you  have  been  using  while  in  Mr. 
Stewart's  employ,  with  the  addition  of  a  cash  book.  He  has  ordered  of  A.  C.  McClurg 
&  Co.  1  journal,  1  sales  book,  1  ledger,  1  bill  book,  and  1  cash  book  ruled  the  same  as  the 
journal. 

McClurg's  man  arrives  with  the  blank  books  ordered  and  hands  you  a  bill  for  them. 

Ordinarily,  the  entry  for  this  transaction  should  be  made  at  once.  As  you  have  not  yet  opened 
the  new  books,  however,  Mr.  Raynor  pays  the  $6.00  out  of  his  own  pocket,  has  the  bill  receipted,  and 
holds  it  until  you  are  ready  to  make  the  entry. 

102 


OPENING    NEW    BOOKS 


103 


Filing.     Place  Incoming  Paper  No,  27  temporarily  in  the  miscellaneous  incoming 
papers  section  of  the  file.     Do  nothing  else  in  regard  to  this  until  further  instructed. 

TRANSFERRING  THE  ACCOUNTS  TO  THE  NEW  BOOKS 

From  an  examination  of  Mr.  Raynor's  books,  from  his  inventory  of  Mdse.,  and  from 
his  valuation  of  property  on  hand,  you  find  that  his  assets  and  liabilities  at  this  time  are 
as  follows: 

Assets 

Cash $     286 .  00 

Bal.  from  O.  L.,  page  4.     Your  teacher  will  hand  you  $86.00  in  cur- 
rency taken  from  your  old  files.     Take  $200.00  from  currency  Env. 

Furniture  &  Fixtures 670 .  00 

Inventory.    Office    furniture    on   hand. 

Merchandise 5259 .50 

Inventory.     This  was  ascertained  by  an  actual  count  and  valua- 
tion of  Mdse.  on  hand.     (See  detailed  list  below.*) 

Notes  Receivable **** , 

Bal.  from  O.  L.,  page  26.     (Incoming  Papers  No.  28  &  29.) 

Interest * . 

Inventory.     Accrued  interest  on  J.  F.  Sprague's  note  for  30  days 
and  on  W.  H.  Harrison's  note  for  15  days. 

Palmer  House  Co.,  cor.  State  and  Monroe  Sts 225. 00 

Bal.  from  O.  L.,  page  43 

Harvard  Hotel  Co.,  5714  Washington  Ave 170. 50 

Bal.  from  O.  L.,  page  26. 

A.  F.  Harvey,  La  Grange,  111 56 .  75 

Bal.  from  O.  L.,  page  34. 


*  INVENTORY  OF  STOCK.  MARCH  2,  19— 

Cat.  No.                Description                   Article  Quan.       Cost  Price 

1982  Mahogany  Chairs  30  2.50     3 

1684  Mahogany  Rockers  45  5.66^ 

184-5  Mission  Chairs  36  2.25 

417  All  sizes  Brass  beds  15  12.00 

584  All  sizes  Brass  beds  15  18.00 

8030  All  sizes  Brass  beds  18  21.00 

970  Mahogany  Dressers  16  21.00 

630  B.  E.  Maple  Drefeers  15  28.00 

714  Tuna  Mahogany      Dressers  12  30.00 

530  Oak  Chiffoniers  6  18.00 

530  Oak  Dressing  tables  6  17.00 

530  Oak  Dressers  6  21.00 

417  Pine  Kitchen  tables  24  2.50 

357  Oak  Dining  tables  15  12.00 

1729  Mahogany  Parlor  suites  2  180.00 

184  Qr.  sawed  oak  Unit  book  shelves  50  2.00 

Assorted  7x10  Jute  rugs  50  15.00 

Assorted  9x12  Turkish  rugs  21  37.50 

6529  All  sizes  Hair  mattresses  12  16.50 

2460  AH  sizes  Felt  mattresses  30  4.10 

4850  All  sizes  Cotton  mattresses  5  2 .  00 


Amount 

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104 


PRACTICAL  OFFICE   WORK  AND    BOOKKEEPING 


Liabilities 

Notes  Payable $500 .  00 

Bal.  from  O.  L.,  page  48.  Note  at  30  days  dated  Feb.  10  of 
this  year,  in  favor  of  S.  Karpen  &  Bros.,  187  Michigan  Ave.,  and 
bearing  6%  interest  from  its  date. 

Interest *.h«* 

Inventory.     Int.  on  note  favor  S.  Karpen  &  Bros.,  **  days  at  6%. 

The  Ford  &  Johnson  Co.,  1441  Wabash  Ave 450. 00 

Bal.  from  O.  L.,  page  60. 

Balkwill  and  Patch,  404  FuUerton  Ave 320 .  60 

Bal.  from  O.  L.,  page  64. 

Bookkeeping.     Your  first  entries  in  the  new  books  will  be  two  journal  entries  and  a 
cash  book  entry  setting  forth  the  above  assets  and  liabilities,  as  follows: 


In  Journal 
MARCH  2,  19— 


H,  T.  Raynor  has  this  day  opened  a  new  set  of  books.  His 
assets,  aside  from  cash,  as  ascertained  from  the  old  books 
and  the  inventories,  are  as  follows: 

Furniture  and  Fixtures  . .  .  Inventory  of  office  furniture 

Merchandise   Inventory 

Notes  Receivable Bal.  from  O.  L.  page  26 

Interest Inventory.     On  J.  F.  Sprague's  note, 

30  ds.  at  6%,  $*.**.     On  W.  H.  Harri- 
son's note,  15  ds.  at  6%,  $*.**. .  . . 

Palmer  House  Co cor  State  and  Monroe  Streets. 

Bal.  from  O.  L.  page  43 

Harvard  Hotel  Co 5714  Washington  Ave. 

Bal.  from  O.  L.  page  25 

A.  F.  Harvey La  Grange,  111. 

Bal.  from  O.  L.  page  34 

H.  T.  Raynor ....  Investment 

2 


Mr. 
H.  T. 


Raynor's  liabilities  at  this  date  are  as  follows: 
Raynor Investment 


Notes  Payable . . 
Interest  


The  Ford  &  Johnson  Go. 
Balkwill  &  Patch 


Bal.  from  O.  L.  page  48.  . . 
On  note  favor  Karpen,  ** 

ds.  at  6% 

1441  Wabash  Ave. 

Bal.  from  O.  L.  page  60. . . 

404  Fullerton  Ave. 

Bal.  from  O.  L.  page  64. .  . 


* 
** 


**** 


** 


** 


**** 


*** 


*** 


*** 


** 


** 


** 


Explanation: 

In  the  first  entry  the  separate  assets  are  debited  and  H.  T.  Raynor  is  credited  for  the  total.  In 
the  second  entry  the  separate  liabilities  are  credited,  Mr.  Raynor  being  debited  for  the  total.  When 
these  entries  are  posted,  the  ledger  will  be  in  balance. 

The  interest  inventories  represent  amounts  which  have  accrued  on  notes  receivable  and  payable 
for  the  time  between  the  date  of  issue  and  the  current  date  (March  2)  in  each  case.  The  accrued  interest 
on  notes  receivable  is  an  asset.    The  accrued  interest  on  the  note  payable  is  a  liability. 


OPENING    NEW    BOOKS 


105 


"Bal.  fromO.  L."  Balance  from  old  ledger.  As  a  matter  of  reference,  the  entries  should  show 
what  pages  of  the  old  ledger  these  accounts  can  be  found  on.  In  such  a  case  the  old  ledger  should 
be  closed  by  means  of  an  entry  in  each  account  showing  to  what  page  in  the  new  ledger  it  has  beea 
transferred. 


19— 


In  Cash  Book 
CASH,  DR. 


Mar. 


H.  T.  Eaynor 


Investment 


286 


Make  the  entries  in  your  journal  and  cash  book.  Number  the  pages  of  the  cash 
book,  giving  corresponding  left  and  right  hand  pages  the  same  number.  Enter  the  notes 
receivable  and  payable  in  the  bill  book. 

Posting. 

Open  accounts  in  the  ledger  in  the  order  given  below,  allowing  for  each  account  one 
line  for  the  heading,  one  line  for  the  ruling,  and  for  the  entries  the  number  of  lines  indi- 
cated. Write  the  names  of  the  accounts  in  your  very  best  penmanship,  slightly  larger 
than  your  usual  handwriting. 


H.  T.  Raynor 14  lines 

Furniture  &  Fixtures 11  lines 

Merchandise 1  page 

Interest 1  page 

Expense 1  page 

Loss  &  Gain. 18  lines 

Petty  Cash  Sales 6  lines 

Notes  Receivable 7  Unes 

Palmer  House  Co.,  cor.  State  &  Monroe  Sts.   8  lines 
Harvard  Hotel  Co.,  5714  Washington  St..  15  lines 

A.  F.  Harvey,  La  Grange,  111 8  lines 

C.  E.  Birch,  1224  Harrison  St 14  lines 

A.  E.  Robson,  4226  Central  Ave 12  lines 

C.  I.  Brown,  405  Monroe  St.,  Peoria,  111.,  5  lines 


Louis  N.  Powers,  1821  Belmont  Ave 14  lines 

B.  A.  Dalton,  2323  Water  St 5  Unes 

D.  G.  Boleyn,  1816  Lake  St 12  lines 

Notes  Payable 18  lines 

The  Ford  &  Johnson  Co. ,  1 441  Wabash  Ave.    8  lines 

Balkwill  &  Patch,  404  Fullerton  Ave 5  lines 

Michigan  Stove  Co.,  Detroit,  Mich 10  lines 

Kimball  &  Chappell  Co.,  2834  Loomis  St.  10  lines 
Detroit  Folding  Cart  Co.,  Detroit,  Mich.  .10  lines 

St.  Johns  Table  Co.,  Cadillac,  Mich 7  lines 

W.  P.  Dunn  Co.,  429  La  Salle  St 7  lines 

Heywood  Bros.  &  Wakefield  Co.,  Gardner, 

Mass 7  lines 

S.  Karpen  &  Bros.,  187  Michigan  Ave 7  lines 


Post  the  opening  entries.  In  posting  from  the  journal  use  the  explanation  "  Inven- 
tory," "  Bal.  from  0.  L.  page  — ,"  or  "  Investment,"  the  same  as  in  the  journal.  In 
posting  from  the  cash  book,  use  the  explanation  "  Investment." 

Transaction  No.  z 

March  2.  Mr.  Raynor  now  turns  over  to  you  the  bill  for  blank  books  bought  of 
McClurg,  instructing  you  to  reimburse  him  from  the  cash  register  for  the  money  advanced 
by  himself  when  the  books  arrived.  Take  McClurg's  bill  from  the  Miscellaneous  Incom- 
ing Papers  section.     It  has  already  been  receipted. 

Bookkeeping.     Make  the  entry  in  the  cash  book,  charging  Expense. 

Note  that  Mr.  Raynor  has  placed  his  O.K.  upon  this  bill.  He  instructs  you  that  all 
bills  must  be  O.K.'d  by  him.  Always  look  for  this  O.K.  on  all  incoming  invoices  before 
making  the  required  entries. 


106  PRACTICAL   OFFICE   WORK    AND  BOOKKEEPING 

Transaction  No.  2 

March  2.  Mr,  Raynor  is  renting  the  store  at  364  Wabash  Ave.  from  M.  C.  Whitney, 
whose  office  is  in  the  Monadnock  Building,  at  a  monthly  rental  of  $100.00.  He  instructs 
you  to  take  Mr.  Whitney  cash  for  the  March  rent  and  to  bring  back  his  receipt. 

The  receipt  is  Incoming  Paper  No.  30  in  the  pad  of  incoming  papers. 

Business  and  legal  Points.     Receipts  have  no  money  value,  but  should  be  carefully  preserved  as 

acknowledgments  of  payment.  Form  receipts  are  not  as  good  evidences  of  payment  as  receipted 
bills,  for  a  receipted  bill  shows  positively  what  the  payment  was  made  for.  A  receipt  is  prima  facie 
evidence  of  the  payment  of  a  debt;  that  is,  it  will  be  accepted  as  proof  unless  better  proof  to  the  con- 
trary be  produced.  There  can  be  no  better  proof  of  payment  than  a  canceled  check  that  has  been  en- 
dorsed, but  even  this  will  not  be  accepted  as  proof  that  the  bill  was  paid  in  full,  even  though  the  words 
"in  full"  be  written  upon  the  check. 

Transaction  No.  3 

March  3.  A.  H.  V.  Love,  representing  Critchell,  Miller,  Whitney  &  Barbour,  agents 
for  the  Commercial  Union  Insurance  Co.,  has  for  some  time  been  soliciting  Mr.  Raynor 
to  take  out  insurance  on  his  stock  of  Mdse.,  and  Mr.  Raynor  has  finally  concluded  to  take 
out  a  $4,000.00  policy.  The  rate  for  one  year  is  $1.25  per  hundred  dollars.  Compute 
the  amount  of  the  premium  due  the  company  on  a  $4,000.00  policy  and  pay  it  in  cash. 

The  policy,  signed  by  the  officers  of  the  insurance  company,  accompanies  your 
outfit.     Examine  it  carefully. 

In  no  way  can  you  learn  more  about  insurance  than  by  a  careful  study  of  the  policy  itself.  The 
form  of  policy  shown  is  what  is  called  a  New  York  Standard  policy  and  contains  all  the  usual  provisions. 
Answer  the  following  questions  on  important  points  mentioned  in  the  body  of  the  policy. 

1.  What  is  the  extent  of  the  company's  liability  in  case  any  loss  or  damage  occurs?     (See  line  1.) 

2.  What  may  the  company  do  instead  of  giving  cash  indemnity?     (Line  4.) 

3.  State  several  causes  for  which  the  policy  may  be  declared  void?     (Line  7.) 

4.  When  is  the  company  not  responsible?     (Line  27.) 

5.  Would  the  company  be  liable  if  an  earthquake  should  destroy  a  house  and  the  house  should 
then  catch  fire  from  the  hot  coals  of  the  kitchen  stove?     (Line  32.) 

6.  How  can  an  insurer  know  whether  a  man  claiming  to  be  an  agent  for  a  certain  company  is  what 
he  claims  to  be?     (Line  42.) 

7.  May  the  insured  cancel  this  policy?  If  so,  how  much  of  his  paid  premium  will  be  retvuned 
to  him?     If  the  company  cancels  his  insurance,  how  much  wiU  be  returned?     (Line  45.) 

8.  What  must  the  insured  do  in  case  of  fire?     (line  59.) 

9.  How  is  the  amount  of  a  fire  loss  decided  upon?     (Line  75.) 

10.  What  proportion  of  any  loss  will  a  given  company  pay?     (liine  84.) 

11.  May  an  agent  alter  the  printed  terms  of  a  policy?     (Line  99.) 

Special  Provisions.  The  regular  provisions  of  the  policy,  as  printed  in  the  standard  policy,  may 
be  altered  by  special  provisions,  written  in  or  printed  and  attached  to  the  policy.  These  provisions  may 
be  on  separate  printed  slips  (called  "riders")  pasted  to  the  policy,  or  several  of  them  may  be  printed 
on  one  form  which  is  then  attached.  Study  carefully  the  rider  represented  on  the  policy  Mr.  Raynor 
received  and  answer  the  following  questions : 

1.  May  the  insured  carry  other  insurance  on  the  same  property? 

2.  Will  the  company  pay  for  property  which  has  been  sold  but  not  delivered  and  is  in  the  building 
at  the  time  of  the  fire? 

3.  How  much  insurance  must  be  carried? 

4.  If  the  insured  does  not  carry  the  fuU  amoimt  required,  what  proportion  of  the  loss  must  he 
bear  himself? 


FIBE   INSURANCE    POLICY  107 

It  should  be  noted  that  many  of  these  special  provisions  are  opposed  to  the  regiilar  provisions  in 
the  body  of  the  policy;  they  invalidate  the  regular  provisions  with  which  they  conflict.  The  eighty 
per  cent,  co-insurance  clause  can  be  better  understood  after  you  have  read  the  following  explanation: 

The  Eighty  Per  Cent  Clause.  This  provides  that  the  insured  must  carry  insurance  to  the 
extent  of  at  least  eighty  per  cent  of  the  value  of  his  property  (any  other  per  cent  may  be  specified, 
but  eighty  is  usual).  Assume,  for  illustration,  that  a  man  has  property  worth  $10,000.00.  He  must 
carry  $8,000.00  insurance.  Assume  that  he  does  carry  $8,000.00,  having  8  policies  of  $1,000.00  each, 
in  different  companies.  Each  company  agrees  to  bear  J^  of  any  loss,  and  the  eight  policies  cover  his 
loss  in  full.  But  if  he  carries  only  five  $1,000.00  policies,  he  can  collect  only  ^4  of  his  loss.  He  is  thus 
forced  to  bear  %  of  the  loss  himself;  this  is  what  is  meant  by  saying  that  he  is  "co-insurer."  The  com- 
panies do  not  propose  to  pay  him  in  full  for  a  small  loss  unless  he  insures  in  full  and  pays  the  larger  pre- 
mium. Suppose  for  instance  he  is  insured  for  $5,000.00  in  the  above  case  (when  he  should  have  been 
insured  for  $8,000.00)  and  a  $5,000.00  loss  occurs.  The  company  will  not  pay  his  full  loss,  though 
the  policy  is  big  enough  to  cover  it.     They  will  pay  him  only  %  of  his  loss,  or  $3, 125.00. 

The  reason  the  companies  do  riot  insist  that  property  be  insured  for  full  value  (100%)  is  that  the 
owner  might  then  be  tempted  to  burn  his  own  property  for  its  insurance,  or  that  at  least  he  might  then 
be  less  careful  than  he  would  be  if  not  fully  insured. 

Special  Rates  for  Residences.  Residences,  household  goods,  and  rents  being  regarded  as  good 
risks,  the  companies  will  often  insure  for  three  years  for  double  the  rate  for  one  year.  Insurance 
of  rents  is  the  company's  agreement  that  if  the  building  should  burn  down  they  wiU  continue  paying 
the  rentals  to  the  owner  until  he  has  had  time  to  rebuild. 

Take  the  money  from  the  cash  register  and  pay  Mr.  Love.  He  will  give  you  a  re- 
ceipted bill.     (Incoming  Paper  No.  31.) 

Filing.  Place  the  cash  paid  out  in  the  outgoing  papers  file.  Fold  the  policy  so  that 
the  form  of  brief  will  be  on  the  oustide,  fill  out  the  brief,  and  file  it  with  the  miscellaneous 
incoming  papers. 

Transaction  No.  4 

March  4.  Mr.  Raynor  has  made  a  sale  and  hands  you  a  "sale  ticket"  upon  which  he 
has  written  all  the  data  necessary  for  your  bookkeeping  entry.  He  has  adopted  this  plan 
of  using  sale  tickets  for  all  sales,  and  your  information  in  regard  to  what  sales  have  been 
made,  and  the  terms  of  sale  in  each  case  will  in  future  be  ascertained  from  sale  tickets. 

The  sale  tickets  are  in  a  separate  pad,  from  which  you  will  detach  them  whenever 
instructed  to  do  so  as  your  work  proceeds.  They  are  clearly  marked  with  the  numbers 
of  the  transactions  they  accompany,  so  that  you  can  make  no  mistake. 

Detach  the  sale  ticket  marked  "Transaction  No.  4."     Verify  Mr.  Raynor's  figures. 

Make  out  an  invoice,  giving  it  our  number  151.  The  next  invoice  of  goods  sold 
will  be  number  152. 

As  a  matter  of  convenience,  you  may  now  number  several  of  Mr.  Raynor's  billheads 
in  advance.  This  will  save  you  the  trouble  of  looking  up  the  number  each  time  a  bill 
is  made  out. 

Bookkeeping.  Make  the  entry  for  this  transaction  in  the  sales  book.  This  is  the 
first  entry  in  the  sales  book,  so  you  will  write  the  date  out  in  full  at  the  top  of  the  page. 
Be  sure  to  write  Mr.  Birch's  address  in  the  entry.  Number  the  pages  of  the  sales  book 
at  this  time. 

Filing.  Place  the  invoice  in  the  outgoing  papers  section  of  the  file.  Place  the  sale 
ticket  in  the  envelope  marked  "  Sale  Tickets,"  observing  carefully  the  instructions  printed 
upon  the  envelope. 


108  PRACTICAL   OFFICE   WORK  AND    BOOKKEEPING 

Transaction  No.  5 

March  4.  Mr.  Raynor  hands  you  a  notice  of  freight  received,  which  came  in  the 
morning's  mail.     (Incoming  paper  No.  32.) 

There  is  a  place  on  this  notice  for  your  signature  authorizing  the  agent  of  the  rail- 
road company  to  deliver  the  goods  to  a  drayage  company.  Sign  this,  in  the  space 
marked  "Consignee",  but  do  not  fill  out  the  space  indicating  to  what  driver  the  freight 
is  to  be  delivered.  This  gives  the  road  the  authority  to  send  it  out  by  any  delivery 
company. 

Filing.  Return  the  signed  notice  to  the  railroad  company  by  filing  it  with  the  out- 
going papers. 

You  could,  if  you  wished,  fill  in  the  name  of  some  particular  driver  or  company,  and  hand  the 
freight  notice  to  him.  He  would  present  it  to  the  freight  agent,  and  the  freight  agent  would  be  bound 
to  deliver  to  him.  Many  firms  have  regular  arrangements  with  certain  drayage  companies  to  do  all 
of  their  hauling. 

The  expressman  arrives  with  the  freight  and  an  expense  bill.  This  is  the  bill  for  the 
freight,  at  the  bottom  of  which  has  been  added  the  extra  charge  for  drayage,  $2.00. 
The  expense  bill  is  Incoming  Paper  No.  33.  Note  that  it  has  been  receipted  by  the  rail- 
road.    Pay  the  driver  cash. 

Bookkeeping.     Make  an  entry  in  the  cash  book,  charging  Mdse. 

Filing.  Take  $12.00  from  the  cash  register  and  place  it  in  the  outgoing  papers 
section.     You  will  have  to  make  change. 

Business  Note.  If  Mr.  Raynor  had  sent  his  own  driver  for  the  goods,  he  would  have  had  to  send 
the  amount  of  the  freight  charges  ($10.00),  as  the  railroad  demands  cash  before  it  will  release  the  goods. 
Had  he  hired  an  expressman,  the  expressman  might  have  advanced  the  $10.00  freight  charges  and 
collected  $12.00,  which  includes  his  own  charge  of  $2.00. 

Transaction  No.  6 

March.  4.  Mr.  Raynor  now  hands  you  the  invoice  for  the  above  shipment.  (In- 
coming paper  No.  34.) 

The  invoice  was  received  by  Mr.  Raynor  yesterday,  having  been  mailed  at  the  time  the  goods  were 
shipped  (March  2).  It  takes  less  time  for  mail  to  reach  its  destination  than  for  freight;  this  explains 
why  the  bill  arrived  in  advance  of  the  goods.    As  Mr.  Raynor  deals  in  stoves,  this  is  Mdse. 

See  that  Mr.  Raynor's  O.K.  is  on  the  bill.  The  O.K.  indicates  to  you  that  the 
quantities  and  prices  on  the  bill  are  in  accordance  with  Mr.  Raynor's  agreement  when  he 
bought  the  goods.  You  will  also  find  opposite  each  item  on  the  bill  a  check  mark  (V) 
which  indicates  that  the  quantities  actually  received  agree  exactly  with  the  quantities 
billed.     Verify  the  computations  on  the  bill. 

Trade  Discount.  The  stoves  are  invoiced  by  The  Michigan  Stove  Co.  at  $58.50  and  $37.20. 
But  a  25%  discount  from  these  prices  is  given  to  "the  trade."  This  kind  of  a  discount  is  called  a  "trade 
discount."  You  will  learn  more  about  trade  discounts  later.  For  the  present  simply  bear  in  mind 
that  the  amount  of  the  bill  is  $259.20,  not  $345.60. 

Bookkeeping.  Enter  the  transaction  in  the  journal  making  note  of  the  fact  that  the 
bill  is  dated  March  2. 

Filing.     Place  the  bill  with  the  "Invoices  Payable." 

As  you  are  not  nov/  using  in  your  bookkeeping  system  any  device  for  reminding  you 
when  bills  fall  due,  you  must  watch  the  "Invoices  Payable"  section  of  the  file  very 
closely. 


THE    EXPENSE    BILL  109 

Transaction  No.  7 

March  5.     Mr,  Raynor  places  upon  your  desk  a  sale  ticket  which  explains  itself. 
Detach  this  from  the  pad  of  sale  tickets.     See  that  the  ticket  you  detach  is  marked 
"Transaction  No.  7."     Make  out  an  invoice. 

Filing.  File  the  sale  ticket  as  in  Transaction  No.  4.  Do  this  with  all  sales  tickets 
in  future  as  soon  as  the  bookkeeping  entries  are  made. 

Transaction  No.  8 

March  5.  Receive  a  check  from  the  Harvard  Hotel  Co.  for  $75.00  on  account  (Incom- 
ing Paper  No.  35).     They  ask  for  a  receipt. 

Bookkeeping.     Make  the  entry  in  the  cash  book  crediting  the  Harvard  Hotel  Co. 

Transaction  No.  9 

March  7.     A  sale  is  made  and  the  sale  ticket  is  handed  to  you. 

You  may  take  the  proper  amount  of  cash  from  the  outgoing  papers  section. 

Make  out  an  invoice  and  receipt  it. 

Observe  that  the  selling  price  of  the  stove  is  the  same  as  the  price  on  The  Michigan  Stove  Co.'s  bill 
to  us.     The  profit  we  make  is  in  the  trade  discount  (25%)  allowed  to  us  from  this  list  price. 
Question:    What  was  the  percentage  of  profit  realized  by  us  on  the  sale? 

Bookkeeping.  Make  an  entry  in  the  sales  book  debiting  C.  E.  Birch.  Make  an 
entry  in  the  cash  book  at  once  giving  him  credit  for  the  payment. 

About  noon  to-day  Mr.  Raynor  hears  that  the  H.  Tarrant  Savings  Bank  is  about  to  suspend  pay- 
ment. This  is  the  bank  on  which  the  Harvard  Hotel  Co.'s  check  is  drawn.  He  therefore  urges  you  to 
make  all  speed  to  the  bank  and  cash  the  check  if  possible. 

Read  business  and  legal  point  under  Transaction  No.  14,  page  46,  and  then  explain  Mr.  Raynor's 
anxiety  to  get  this  check  cashed  at  once. 

Upon  arriving  at  the  bank  you  find  that  the  doors  are  closed.  Above  them  hangs  a  notice  signed 
by  the  president  that  the  bank  is  fully  solvent  and  able  to  pay  its  depositors  if  given  time,  but  that  a 
run  on  the  bank  has  exhausted  the  ready  cash  and  therefore  they  have  been  forced  to  close  their  doors 
imtil  they  can  exchange  some  of  their  securities  for  cash.  You  are  therefore  compelled  to  return  to  Mr. 
Raynor  with  the  check  uncashed.     Nothing  further  can  be  done  about  the  matter  at  this  time. 

Question :  Should  the  bank  ultimately  be  able  to  pay  only  60c  on  the  dollar,  what  would  be  the  extent 
of  Mr.  Raynor's  loss  on  the  check? 

Transaction  No.  lo 

March  7.     Your  salary  for  the  first  week  is  now  due,  and  Mr.  Raynor  pays  you  in  cash. 

William  Johnson  has  been  employed  as  clerk  and  stock  boy  at  a  salary  of  $10.00  per 
week.  His  services  are  to  begin  Monday,  March  9.  Make  a  notation  of  these  facts  in 
the  journal.     Write  nothing  in  the  money  columns. 

Posting.  As  it  is  now  the  end  of  the  week,  Mr.  Raynor  requests  you  to  post  all 
original  entries  up  to  date,  prove  the  cash,  and  take  a  trial  balance. 

First:  Post  all  sales  book  entries  to  the  debit  of  the  proper  accounts,  using  the  initial 
S  as  an  explanation  in  each  case.  Do  not  post  the  footing  to  the  credit  of  Mdse.  at  this 
time. 


220  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

Neatness  and  Care  in  Posting.  The  ambitious  student,  anxious  to  do  good  work  and  receive  good 
grades,  will  naturally  bring  to  bear  his  very  best  efforts  at  all  times.  There  is  an  especial  reason,  how- 
ever, for  the  exercise  of  care  in  posting.  Posting,  except  at  the  very  beginning  when  one  is  learning  how, 
is  a  purely  mechanical  process  involving  no  thinking  or  reasoning.  For  this  reason  the  bookkeeper  posts 
rapidly  and  sometimes  carelessly.  Mistakes  are  likely  to  occur,  and  carelessly-made  figures  are  likely 
to  give  a  great  deal  of  trouble.  Errors  that  arise  from  carelessly-made  figures  are  very  difficult  to  dis- 
cover, as  the  bookkeeper  is  ahnost  certain  to  read  a  given  figure,  the  second  time  he  adds  a  column,  the 
same  way  he  read  it  at  first. 

Second:     Post  all  unposted  journal  entries. 

Third:  Post  all  unposted  cash  debits  to  the  credit  of  the  accounts  named  in  the 
explanatory  column,  and  post  all  cash  credits  to  the  debit  of  the  accounts  named.  Use 
the  initial  C  as  an  explanation  in  each  case. 

The  reasons  for  the  order  of  posting  suggested  above  are:  (1)  The  sales  book  contains  charges  against 
customers,  and  these  should  be  posted  before  the  credits  to  the  customers  are  posted  from  the  journal 
or  cash  book;  (2)  The  journal  contains  credits  to  those  from  whom  we  purchase,  and  should  be  posted 
before  the  debits  (our  payments)  are  posted  from  the  cash  book. 

Fourth:  Close  the  cash  book  with  a  red  ink  balance.  This  being  Saturday,  March  7, 
the  balance  brought  down  may  be  dated  March  9. 

Does  this  balance  agree  with  the  amount  of  cash  in  the  cash  registel-  (including  the 
check  for  $75.00)? 

Fifth:  Take  a  trial  balance.  This  must  include  the  amount  of  the  cash  balance,  and 
must  include  the  total  of  Mdse.  sales  (taken  from  the  lead  pencil  footings)  as  a  credit. 

Student's  Report  No.  9.  You  will  fill  out  Student's  Report  No.  9  in  the  same  way 
you  have  filled  out  former  reports.  You  cannot  fill  out  the  cash  proof  and  bank  proof 
on  this  report,  as  Mr.  Raynor  has  no  bank  account  as  yet.  Your  files  were  emptied  at 
the  end  of  February ;  therefore  your  report  will  include  nothing  but  Mr.  Raynor's  business. 


Transaction  No.  xi 

March  9.  Mr.  Raynor  has  just  learned  that  the  H.  Tarrant  Savings  Bank  is  not 
insolvent,  as  he  had  feared,  but  will  be  able  to  pay  all  obligations.  He  has  been  taught 
a  valuable  lesson,  however,  and  will  make  it  a  rule  in  future  to  hold  no  checks  longer  than 
twenty-four  hours. 

After  investigating  the  standing  of  the  Merchant's  Exchange  Bank,  of  this  city,  Mr. 
Raynor  has  decided  to  open  an  account  with  that  bank,  as  its  resources  are  ample,  its 
reputation  of  the  best,  and  its  directors  and  officers  cautious  in  their  investments  and  con- 
servative in  their  management.  He  instructs  you  to  deposit  the  check  and  all  cash  on 
hand  except  $68.00  in  the  Merchant's  Exchange  Bank.  He  has  already  made  arrange- 
ments with  the  bank  and  has  left  his  signature. 

Open  an  account  with  the  bank,  consulting  page  38  for  the  procedure.  Use  your  old 
pass  book  and  check  book,  beginning  each  on  a  new  page. 

Did  you  remember  to  endorse  the  check  at  the  time  of  depositing? 


variable  selling  prices 
Variable  Selling  Prices* 


111 


Ask  your  teacher  to  assign  to  you  one  of  the  following  lists,  and  in  future  when  selling 
beds  or  mattresses  invoice  them  at  the  prices  named  in  the  list. 


List  1 

List  2 

Lists 

List  4 

List  5 

List  6 

List  7 

No.  417  brass  beds 

$18.00 
27.00 
26.90 

3.20 
24.70 

6.10 

$17.50 
27.50 
30.00 

3.25 
24.25 

5.95 

$17.75 
27.25 
30.25 

3.30 
24.50 

6.05 

$18.00 
27.00 
30.50 

3.25 
24.75 

6.15 

$18.25 
26.75 
30.75 

3.20 
25.00 

6.25 

$18.50 
26.50 
31.00 

3.15 
25.25 

6.35 

$18.00 

No.  584  brass  beds 

No.  6030  brass  beds 

27.05 
30.00 

No.  91 1  iron  beds 

3.00 

No.  6529  hair  mattresses 

25.00 

No.  2460  felt  mattresses  . .               

6.00 

No.  417  brass  beds 

No.  584  brass  beds 

No.  6030  brass  beds 

No.  911  iron  beds 

No.  6529  hair  mattresses 
No.  2460  felt  mattresses. 


Lists 


$18.10 

27.10 

30.25 

3.10 

24.00 

6.05 


List  9 


$18.20 
27.15 
30.50 

3.20 
24.25 

6.10 


List  10 


$18.30 
27.20 
30.75 

3.30 
24.50 

6.15 


List  11 


$18.40 

27.25 

31.00 

3.40 

24.75 

6.20 


List  12 


$18.50 
27.30 
26.50 

3.50 
25.00 

6.25 


List  13 


$18.60 
27.35 
26.75 

3.05 
25.25 

6.30 


List  14 


$18.70 

27.40 

27.00 

3.15 

25.50 

6.00 


List  15 

List  16 

List  17 

List  18 

List  19 

List  20 

No.  417  brass  beds 

$18.80 

27.45 

27.25 

3.25 

24.10 

6.05 

$18.90 

27.50 

27.50 

3.35 

24.20 

6.10 

$19.00 
27.55 
27.75 

3.45 
24.30 

6.20 

$18.05 
27.60 
28.00 

3.50 
24.40 

6.30 

$18.15 
27  65 
28.25 

3.25 
24.50 

6.40 

$18.25 

No.  584  brass  beds 

27.70 

No.  6030  brass  beds 

28.50 

No.  911  iron  beds 

3.00 

No.  6529  hair  mattresses 

24.60 

No.  2460  felt  mattresses 

6  50 

No.  417  brass  beds 

No.  584  brass  beds 

No.  6030  brass  beds 

No.  911  iron  beds 

No.  6529  hair  mattresses, 
No.  2460  felt  mattresses . 


List  21 

List  22 

List  23 

List  24 

List  25 

$18.35 

$18.45 

$18.55 

$18.65 

$18.75 

27.75 

27.80 

27.85 

27.90 

27.95 

28.75 

29.00 

29.25 

29.50 

30.00 

2.75 

2.80 

2.90 

3.00 

3.10 

24.70 

24.80 

24.90 

25.00 

24.50 

6.15 

6.25 

6.35 

6.00 

6.45 

List  26 

$18.85 
27.50 
30.50 

3.20 
24.25 

6.00 


Transaction  No.  12 


March  10.  Receive  from  the  Kimball  &  Chappell  Company,  2834  Loomis  St.,  Chicago 
111.,  an  invoice  (Incoming  Paper  No.  36).  See  that  it  has  been  O.K.'d  by  Mr.  Ilaynor 
as  to  prices  and  quantities  listed  on  it. 

Note  that  the  terms  are  "Cash."  As  soon  as  you  have  verified  the  extensions,  you 
may  give  them  a  check.     The  invoice  is  already  receipted. 


112  PRACTICAL  OFFICE   WORK   AND   BOOKKEEPING 

Bookkeeping.  Make  two  entries,  one  in  the  journal,  crediting  the  Kimball  &  Chappell 
Co.  for  the  amount  of  the  purchase,  and  one  in  the  cash  book,  debiting  them  for  our  pay- 
ment. Thus  a  complete  record  of  the  transaction  will  be  shown  in  the  ledger  when  both 
entries  are  posted. 

Mr.  Raynor  wishes  to  keep  complete  records  of  all  transactions  with  persons  from  whom  he  buys 
Mdse.  Whenever  a  purchase  is  made,  even  though  settlement  is  made  at  once,  the  transaction  is  to  be 
carried  through  our  ledger  account  with  the  person  from  whom  we  buy.  The  person  is  credited  through 
the  journal  in  every  case.  Then  if  the  payment  is  cash,  the  person  is  at  once  debited  through  the  cash 
book.  If  the  payment  is  by  note,  then  the  person  is  debited  through  the  journal.  If  the  payment  is 
part  cash  and  part  note,  entries  debiting  the  person  are  required  in  both  books. 

Mr.  Raynor  also  wishes  to  keep  complete  records  of  all  transactions  with  persons  to  whom  we  sell 
Mdse.  (except  in  case  of  a  'petty  cash  sale,  about  which  you  will  learn  later).  The  person  is  charged  through 
the  sales  book,  in  every  case.  Then  the  credit  is  at  once  made  through  the  cash  book,  the  journal,  or 
both  cash  book  and  journal,  depending  upon  whether  the  settlement  is  made  in  cash,  by  note,  or  part 
cash  and  part  note. 

Transaction  No.  13 

March  10.  Receive  a  check  from  the  Palmer  House  Co.,  in  full  of  account.  Also 
receive  a  check  from  the  Harvard  Hotel  Co.  on  account.     In  each  case  a  receipt  is  requested. 

Note.  When  a  check  is  given  in  payment  of  a  bill,  a  receipt  is  not  necessary,  because  the  check  itself 
operates  as  a  receipt.  In  order  to  cash  a  check  or  to  deposit  it,  the  payee  must  endorse  it.  The  bank, 
after  paying  the  check  or  accepting  it  on  deposit,  stamps  it  "paid"  and  charges  the  account  of  the  drawer 
if  he  be  a  depositor  in  the  same  bank;  or,  if  the  check  be  drawn  against  some  other  bank,  returns  it  to 
that  bank,  which  then  charges  the  drawer.  When  the  drawer  gets  his  statement  from  the  bank  at  the 
end  of  the  month,  it  is  accompanied  by  the  paid  checks,  as  you  have  learned.  These  paid  checks  are 
endorsed,  each  with  the  name  of  the  payee.  Hence  one  who  pays  by  check  has  a  receipt  for  such  pay- 
ment when  the  check  is  finally  returned  to  him,  and  needs  no  other.  For  convenience,  however,  many 
business  men  like  to  get  receipts  in  every  case,  even  though  payment  be  made  by  check.  The  checks  are 
primarily  records  of  business  done  with  the  bank,  and  it  is  not  always  convenient  to  refer  to  them.  Separate 
receipts  are  requested  in  such  cases,  and  these  can  be  filed  under  the  name  of  the  creditor.  It  goes  with- 
out saying  that  whenever  a  customer  requests  a  receipt  the  creditor  will  oblige  him. 

Transaction  No.  14 

March  10.     Make  a  deposit  of  the  two  checks  now  on  hand. 

Transaction  No.  15 

March  11.  A  sale  ticket  is  handed  to  you.  The  prices  for  the  first  two  items  are  to 
be  filled  in  by  you  from  the  special  price  list  on  page  103  which  your  teacher  has  assigned 
to  you. 

Transaction  No.  16 

March  12.  Mr.  Raynor  desires  to  know  whether  we  have  a  large  enough  balance  in 
the  bank  to  pay  by  check  our  note  favor  of  S.  Karpen  &  Bros,  with  accrued  interest  for 
30  days. 


TELEGRAMS  113 

Compute  the  interest  carefully.  If  you  find  that  we  have  enough  money  in  the  bank, 
draw  a  check  for  the  amount  of  the  note  and  interest. 

Bookkeeping.     Make  two  entries  in  the  cash  book,  one  for  the  note  and  one  for  interest. 

Transaction  No.  17 

March  12.     Mr.  Raynor  hands  you  this  sale  ticket. 

Take  $60.00  from  outgoing  papers;  $20.00  from  currency  envelope.   Make  out  an  invoice  and  receipt  it. 

Mr.  Raynor's  note  is  returned  by  S.  Karpen  &  Bros.,  canceled.  (Incoming  Paper 
No.  39.)     See  that  the  cancellation  is  properly  made,  and  file  the  paper  with  the  receipts. 

Transaction  No.  18 

March  13.  A  notice  of  freight  received  arrived  in  this  morning's  mail.  (Incoming 
Paper  No.  40.)     Sign  and  return  it.     (See  Transaction  No.  5,  page  100.) 

Later  in  the  day  an  expressman  arrives  with  the  freight  from  the  Michigan  Central 
depot,  and  hands  you  an  expense  bill.     (Incoming  Paper  No.  41.)     Pay  it  in  cash. 

Bookkeeping  and  filing  same  as  in  Transaction  No.  5. 

Transaction  No.  19 

March  13.  Mr.  Raynor  hands  you  the  invoice  for  this  last  shipment  (Incoming  Paper 
No.  42)  which  he  has  O.K.'d.     Verify  the  extensions  and  addition. 

Transaction  No.  ao 

March  13.     Make  a  deposit  of  $100.00  in  currency. 

Transaction  No.  2X 

March  13.  August  Reese  has  been  hired  to  wash  the  windows,  scrub  the  floors  and 
polish  furniture  today.  Mr.  Raynor  instructs  you  to  pay  him  $2.00  in  cash  for  his  day's 
work. 

The  cash  must  be  paid  dut  of  the  cash  register. 

Transaction  No.  22 

March  14.  Last  Monday  Mr.  Raynor  received  a  bill  from  the  St.  Johns  Table  Co., 
Cadillac,  Mich.  The  bill  was  dated  March  7  and  we  were  advised  that  the  tables  were 
shipped  on  that  date  via  the  Michigan  Central;  but  we  have  not  yet  received  them.  Mr. 
Raynor  suggests  that  you  wire  them  asking  that  they  send  a  "tracer"  after  the  goods. 

A  "tracer"  is  a  paper  sent  after  a  shipment.  It  must  start  at  the  shipping  point  and  go  forward 
through  the  hands  of  each  raiboad  employee  who  has  handled  the  shipment.  Each  employee  must  note 
thereon  the  time  of  receiving  the  shipment  and  the  time  it  left  his  hands,  with  the  reason  for  delay  if  there 
was  a  delay.  The  use  of  a  tracer  often  aids  in  correcting  errors  in  transportation,  and  it  is  supposed  to 
accelerate  the  progress  of  the  goods.  Upon  receipt  of  a  request  for  a  tracer,  the  railroad  company  will 
issue  the  tracer,  sending  a  dupUcate  of  it  to  the  consignor  who  makes  the  request. 


114 


PRACTICAL   OFFICE    WORK   AND    BOOKKEEPING 


Telegrams 

The  sender  of  a  telegram  must  write  it  on  the  telegraph  company's  ruled  blank.  The  blank  is  rtiled 
into  squares  and  the  sender  writes  one  word  in  each  square.  This  is  for  the  operator's  convenience  in 
counting. 

The  company  will  charge  for  ten  words  at  least.  If  a  telegram  should  contain  fewer  than  ten  words, 
the  charge  will  be  for  ten  words.  The  usual  rate  for  messages  that  do  not  have  to  go  a  long  distance 
or  to  be  transferred  from  one  wire  to  another  is  25c  for  the  first  ten  words  with  2c  additional  for  each 
word  in  excess  of  ten. 

To  guard  against  mistake,  messages  are  often  repeated;  that  is,  the  receiving  operator  wires  back 
to  the  sending  operator,  repeating  the  message  for  comparison.  For  this,  one-half  is  added  to  the  origi- 
nal  charge. 

Messages  can  be  sent  during  the  night  for  less  money,  as  the  wires  are  less  busy  diu-ing  the  night. 
Messages  sent  at  the  night  rate  wUl  not  be  delivered  until  morning. 

In  coimting  words,  each  figure  is  counted  as  one  word.  It  is  therefore  better  to  spell  out  such 
expressions  as  "Five  thousand,"   "Seven  thirty,"  etc. 

The  rate  to  Cadillac  is  25c.  Send  a  ten-word  message.  A  telegraph  blank  accom- 
panies your  outfit. 

In  order  to  make  the  change  it  will  be  necessary  for  you  to  have  some  25c  pieces. 
You  will  find  four  of  these  in  the  currency  envelope.  Place  them  in  the  outgoing  papers 
section  of  the  file  so  that  you  can  make  change. 

Pay  the  25c  from  the  cash  register. 


Transaction  No.  23 

March  14.     Mr.  Raynor  instructs  you  to  take  from  the  cash  register  the  amount  of 
your  own  salary  and  to  pay  Wm.  Johnson  $10.00  as  agreed. 

Bookkeeping.     One  entry  only  is  required  in  the  cash  book.     This  entry  should 
show  in  detail  to  whom  the  money  was  paid,  two  lines  being  used  thus: 

19— 


Mar. 


14 


Expense 


Bookkeeper's  salary,  20.00 
Wm.  Johnson's  salary,  10.00 


30  00 


Take  the  cash  from  the  cash  register  and  file  it  with  the  outgoing  papers. 

Posting.  The  posting  should  now  be  brought  up  to  date.  Do  not  post  the  total 
sales,  nor  rule  up  the  sales  book.     (See  instructions  following  Transaction  No.  10.) 

Trial  Balance.  Close  the  cash  book,  and  take  a  trial  balance.  The  sales  total  must 
be  included  in  the  trial  balance. 

Report  No.  10  should  be  made  out  at  this  time.  The  report  on  papers  issued 
should  include  all  papers  issued  since  March  1. 


Transaction  No.  24 

March  16.  A  notice  is  received  from  the  Michigan  Central  Railroad  Co.  that  a  ship- 
ment has  arrived  for  you  from  Cadillac,  Mich.  Sign  and  return  it.  (See  Transaction 
No.  6),    The  notice  is  Incoming  Paper  No.  43. 


SHIPPING   GOODS  115 


The  drayman  arrives  with  the  freight  and  an  expense  bill  (Incoming  Paper   No.  44) 

which  we  pay  by  check.     See  that  it  is  receipted  by  the  railroad  company. 
Bookkeeping  and  filing  as  in  Transaction  No.  5. 


Transaction  No.  25 

March  16.  Mr.  Raynor  now  O.K.'s  the  invoice  received  from  the  St.  Johns  Table 
Company  (Incoming  Paper  No.  45)  and  hands  it  to  you.  Verify  the  extensions  and 
addition. 

Bookkeeping  and  filing  as  in  previous  similar  transactions. 


Transaction  No.  26 

March  17.  C.  I.  Brown,  of  Peoria,  111.,  left  an  order  today  for  1  oak  bedroom  suite 
No.  530.     Mr.  Raynor  made  the  sale  and  filled  out  the  sale  ticket  in  the  usual  way. 

"F.  0.  B."  Mr.  Raynor  has  written  on  the  sale  ticket  "F.  O.  B.  Chicago,  via  C.  R. 
I.  &  P.".  "F.  O.  B.  Chicago"  (free  on  board  at  Chicago)  means  that  the  price  at  which 
the  goods  were  sold  is  the  price  at  Chicago,  which  is  another  way  of  saying  that  Mr. 
Brown  must  bear  the  freight  expense.  "Via  C.R.  I.  &  P."  means  "Ship  by  way  of  the 
Chicago,  Rock  Island  &  Pacific  Railway." 

Shipping.  The  first  thing  to  do  is  to  make  out  the  bill  of  lading  (in  triplicate)  pre- 
paratory to  taking  the  goods  to  the  freight  depot. 

The  shipper  does  this  for  his  own  convenience.  He  has  on  hand  a  supply  of  bills  of  lading.  His 
shipping  clerk  fills  them  out  in  advance  (all  except  the  weight  and  rate  and  the  railroad  company's 
signature)  thus  avoiding  confusion  and  delay  at  the  freight  office.  All  that  the  receiving  clerk  at  the 
freight  office  has  to  do  is  to  give  them  a  number  and  affix  his  signature  as  agent  for  the  railroad.  If 
the  shipment  is  to  be  prepaid,  or  for  some  other  reason  the  shipper  desires  it,  the  freight  clerk  will  fill 
in  the  weight  (subject  to  correction)  and  have  the  rate  inserted  by  the  proper  official. 

A  large  shipper  usually  has  his  own  supply  of  bills  of  lading  in  which  he  is  allowed  to  have  printed 
his  own  name  and  location,  and  any  matter  which  he  may  wish  for  the  convenience  of  his  shipping 
clerk.  A  smaller  shipper  is  usually  content  to  use  forms  furnished  him  by  the  different  railroad  com- 
panies, or  stock  forms  in  which  he  inserts  his  own  name  and  location  and  the  name  of  the  road  over 
which  he  ships. 

Bills  of  lading  may  be  "straight"  or  "order."  "Straight"  bills  of  lading  are  used  when  the  goods 
are  to  go  straight  to  the  consignee.  They  are  non-negotiable.  They  must  be  printed  on  white  paper. 
"Order"  bill  of  lading  are  for  shipments  "to  the  order  of"  some  one  (usually  the  shipper)  and  may  be 
endorsed  by  that  one  over  to  another.  They  are  used  usually  for  the  purpose  of  shipping  C.  O.  D. 
in  which  case  they  will  not  be  endorsed  over  to  the  person  for  whom  the  goods  are  intended  until  he  has 
paid  for  the  goods.  "Order"  bills  of  lading  must  be  printed  in  colors — the  first  in  yellow,  and  the  second 
and  third  in  blue. 

Mr.  Raynor  has  a  pad  of  stock  forms  of  "straight"  bills  of  lading.  They  are  in  tripli- 
cate, that  is,  they  come  in  sets  of  three  which  are  filled  out  at  once.  The  first  is  the 
original;  the  second  is  the  shipping  order,  the  third  is  the  memorandum.  Detach  one 
set  of  three  from  the  pad  which  accompanies  your  outfit  and  fill  them  out  all  alike  (this 
is  usually  done  with  carbon  paper).  Sign  Mr.  Raynor 's  name  followed  by  your  initials 
in  the  lower  left  hand  corner.  Study  the  forms  carefully,  especially  the  headings,  which 
explain  the  purpose  and  use  of  each  of  the  three  papers  constituting  the  set. 


116 


PRACTICAL   OFFICE    WORK   AND    BOOKKEEPING 


£ 
IS 


Uniform  Bill  of  Lading 


(^/f^}^ 


V 

STRAIGHT  BILL  OF  LADING-ORIGINAL-NOT  NEGOTIABLE.' 


Railroad  Company^ 

Skipper's  No>..j^.... 
Agent**  No. 


iffs  in  effect  oo  tbe  date  of  Issue  of  thii 


19— _ 


FROM 


tbe  property  de^ribed  below,  in  apparent  good  order,  except  as  noted  (contents  and  condition  of  contents  of  packac^s  unknown),  marked,  consitrned  and  destined  as  Id* 
dlcated  below,  which  said  comoanr  aerees  to  carry  to  its  usual  place  of  delivery  at  said  destination,  if  on  Its  roadM>iherwise  to  deliver  to  another  carrier  on  the  route  M 
said  destinaiion.  It  is  mutually  agreed,  as  to  each  carrierof  allorany  of  said  property,  over  all  or  any  portion  of  said  route  to  destination,  and  as  to  each  party  at  any 
time  interested  In  all  or  any  of  said  property,  that  every  service  to  be  performed  hereunder,  shall  be  subject  to  all  the  conditions,  whether  printed  or  written  herein 
contained  (INCLUDING  CONDITIONS  DM  BACK  HEREOF)  and  which  are  agreed  toby  the  shipper  and  accepted  for  himself  and  his  assigns.  w 


The  rate  of  freight  from. 



to.. 





Is  in  Cents  per  100  lbs. 

IF.TimetM 

IF  Ut  CliM 

IF2ilCliit 

IF  Rule  26 

IF  3d  Glut 

IFRttla26 

IF  RttI*  28 

IF4tliCI«n 

IFBtliCUn 

IFSthClau 

IF  S»Mial 

IF  (MCtal 

Mr  

Mf - - 

(Mail  Addiew— Not  for  purpoaa*  of  DeUrerT.) 


Per. 


.j^£....^..f.t//e.?it.5/tf71..|i.j?..r€.J        pe^ 

(TbU  BUI  ot  Lading  U  to  be  siinied  by  tbe  (hlpper  and  aceDiot^oufrierlMuliic'i 


When  your  drayman  takes  the  shipment  to  the  freight  depot,  the  agent,  F.  L.  Ham- 
mer (represented  by  your  teacher),  signs  the  bills  of  lading  for  the  railroad  company  and 
gives  them  the  number  20167.  He  will  keep  the  shipping  order,  returning  the  other  two 
to  you.     You  are  to  keep  the  original,  sending  the  memorandum  to  Mr.  Brown. 

The  memorandum  is  valueless  to  the  consignee  except  as  a  memorandum.  He  cannot  get  goods 
from  the  railroad  company  on  it.  If  he  is  not  known  and  the  company  demands  a  bill  of  lading,  he  will 
have  to  instruct  the  consignor  to  send  him  the  original.  In  the  above  case,  had  Mr.  Brown  requested 
Mr.  Raynor  to  send  him  a  bill  of  lading,  you  would  have  sent  him  the  original  and  retained  the  memoran- 
dum. 

Filing.  Mail  the  shipper's  memorandum  and  Mr.  Raynor's  invoice  to  Mr.  Brown  by 
filing  them  with  the  outgoing  papers.  File  the  original  bill  of  lading  with  the  miscellane- 
ous incoming  papers. 

Transaction  No.  27 

March  18.     A  sale  ticket  is  handed  to  you. 


Transaction  No.  28 

March  19.     Receive  a  bill  from  the  Lord  &  Thomas  advertising    agency  for  ads 
in  the  Chicago  papers  yesterday.     This  is  Incoming  Paper  No.  46.     Pay  it  by  check. 


straight  bills  of  lading  117 

Headings  for  the  Three  Forms 

A 


IMform  Bill  •!  Ladla}— Standard  lonii  ol  StnigM  Bill  «l  Lading  appromd  by  th«  IntenUt  Conimrc*  Comnission  by  Ordtr  No.  787  of  JuM  27, 1908. 

Railroad  Company. 

Shippers  No. „, 

STRAIGHT  BILL   OF  LADING— ORIGINAL— NOT  NEGOTIABLE. 

Agents  No. 


RECEIVED,  subject  to  the  classiScatioox  and  tariffs  Id  effect  on  tbe  date  of  Issne  of  tbis  Origloal  Bill  of  Lading. 


£rc. 

B 


F«r  UM  in  eonawiioa  wtth  tin  Standard  lorm  ol  Sbaiglil  Bill  ol  Lading  approved  by  the  lnt(n!ate  Co^nmerce  Comnission  by  Order  No  787  cl  June  27, 1908. 

Railroad   Company. 

Shippers  No. ..._ 

THIS    SHIPPING    ORDER    oiikI  be  leglbly  tilled  In,  in  Ink,  in  Indelible  Pencil,  or  in  Carbon,  and 
retained  by  Mie  AgenL ^ggnjs    No. 


BSCCIVE,  aaWwt  to  LI*  <ihiwmctWDi  and  tariff*  In  effect  oo  tbe  date  of  Ktue  of  tbis  Sbipplnc  Order.      £^rC. 


For  UM  In  connection  wiUi  the  Standard  lorm  ol  Straiglit  Bill  ol  Lading  approved  by  Ibe  Interstate  Commerce  Commission  by  Order  No.  787  ol  line  27, 1908. 

Railroad  Company. 

THIS    MEMORANDUM    >>  an  acknowledgmem  Hial  a  bill  ol  lading  has  been  issued  and  is  not  the  Shippers  No. 

Original  Bill  ol  Lading,  nor  a  copy  or  duplicate,  covering  ttie  property 

named  herein,  and  is  intended  solely  lor  tiling  or  record.  Agents    No. 

RECEIVED,  subject  to  tbe  classifications  and  tariffs  In  effect  on  tbe  date  of  tbe  receipt  by  tbe  carrier  of  tbe  propertr  described 
In  tbe  Original  Bill  of  Lading,  frc 

Business  Point.  Many  business  houses  have  their  advertising  written  and  placed  by  advertising 
firms.  These  firms  profess  to  be  expert  at  writing  display  ads  and  to  have  sujierior  knowledge  as  to  the 
best  advertising  mediums  for  different  purposes.  They  contract  with  newspapers  and  periodicals  for  a 
large  amount  of  advertising  spqce  and  secure  special  discounts  from  them  so  that  they  can  offer  the  adver- 
tiser the  usual  rates  and  still  make  a  good  profit. 

Write  copy  for  a  quarter-page  newspaper  advertisement  and  submit  it  to  your  teacher 
for  criticism. 

Transaction  No.  29 

March  20.  A  sale  ticket  is  handed  to  you.  Insert  the  prices,  as  ascertained  from 
the  price  Ust  which  has  been  assigned  you,  as  you  did  in  Transaction  No.  15. 

Transaction  No.  30 

March  21.  The  W.  P.  Dunn  Co.,  429  La  Salle  St.,  submits  a  bill  for  printing  adver- 
tising circulars  for  us. 

Transaction  No.  31 

March  21.  Mr.  Raynor  hands  you  a  sale  ticket  and  a  check  (Incoming  Paper  No.  48) 
to  cover  the  amount  of  the  sale.     Make  out  an  invoice  and  receipt  it. 


118  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

Transaction  No.  32 

March  21.  Pay  the  salaries  of  the  bookkeeper  and  the  stock  boy  in  cash  as  on  pre- 
vious Saturdays.     You  will  have  to  get  the  cash  from  the  bank. 

Procedure.  Draw  a  check  to  "Currency"  for  the  total  salaries  to  be  paid  out.  Have 
it  signed  by  Mr.  Raynor,  and  draw  the  money  at  the  bank  by  taking  it  from  the  outgoing 
papers  section.  Then  pay  $20.00  to  yourself  as,  bookkeeper,  and  $10.00  to  the  stock 
boy,  Wm.  Johnson.     See  Transaction  No.  23. 

Transaction  No.  33 

March  21.     Deposit  the  check  received  from  D.  G.  Boleyn. 

Transaction  No.  34 

March  21.  Send  The  Ford  &  Johnson  Co.  our  60-day  note  for  $450.00  in  full  of 
account.     The  note  is  to  bear  6%  interest. 

As  this  is  Saturday  night  you  will  remember  to  post  your  books  up  to  date.  Close 
the  cash  book,  and  take  a  trial  balance. 

Student's  Report  No.  1 1  should  be  made  out  at  this  time  and  handed  to  your  teacher. 

Transaction  No.  35 
March  23.     A  sale  ticket  is  handed  you.     Proceed  exactly  as  in  Transaction  No.  15. 

Transaction  No.  36 

March  24.  Receive  of  Heywood  Brothers  and  Wakefield  Company  upholstered  chairs 
as  per  invoice  (Incoming  Paper  No.  49).  No  terms  being  written  on  the  invoice,  it  is 
assumed  that  the  purchase  is  "on  account." 

This  company  is  located  at  Gardner,  Mass.,  but  has  a  Chicago  office  and  the  goods 
were  delivered  from  the  local  storeroom.    For  this  reason  there  is  no  freight  bill  to  pay. 

Trade  discount.  The  invoice  reads  "$162.00  less  50  and  5%."  This  means  that  50%  is  taken  off 
and  then  5%  is  taken  off  of  the  remainder.  Questions:  What  would  the  trade  discount  have  amounted 
to  had  it  been  55%  instead  of  50  and  5%?     Why  is  a  different  result  secured? 

In  many  lines  it  is  customary  to  give  a  series  of  discounts  in  this  way.  Sometimes  three  or  four  suc- 
cessive discounts  are  given.  In  the  hardware  business  it  is  not  unusual  to  see  a  series  like  the  following: 
"70,  25,  7*  and  5%." 

These  successive  discounts  are  given  separately  because  each  exists  for  a  special  reason  and  may  have 
been  made  at  a  different  time.  In  some  lines  the  same  printed  catalog  is  used  for  both  the  retail  and 
wholesale  trades.  The  dealer  gets  a  discount  to  which  the  retail  buyer  is  not  entitled.  The  price  may 
go  down  on  a  certain  article,  and  instead  of  printing  another  catalog,  the  dealer  gives  a  second  discount. 
Some  article  may  be  hard  to  sell,  and  on  it  a  third  discount  is  given.  Still  another  discount  may  be  offered 
in  a  certain  territory  in  order  to  meet  competition.  And  so  on.  The  catalog  price  remains  the  same. 
The  real  price  to  a  certain  customer  is  regulated  by  the  discounts. 

Problems: 

1.  Find  the  net  amount  of  $100.00  less  70,  25,  10  and  5%. 

2.  Find  the  net  amount  of  $674.00  less  50,  10  and  7J%. 

3.  Find  the  net  amount  of  $500.00  less  25,  10,  10  and  5%. 

4.  Find  the  net  amount  of  $500.00  less  10,  5,  10  and  25%. 

5.  Why  is  the  answer  to  problem  4  the  same  as  the  answer  to  problem  3? 

6.  State  as  a  general  rule  the  conclusion  you  reached  in  answering  the  last  question. 


A   BANK   DRAFT 


Transaction  No.  37 


119 


March  25.  Receive  $100.00  in  cash  from  A,  E.  Robson  on  account.  The  cash  may 
be  taken  from  the  currency  envelope.     Give  Mr.  Robson  a  receipt. 

Transaction  No.  38 
March  25.     A  sale  ticket  is  placed  upon  your  desk.     You  know  what  to  do  with  it. 

Transaction  No.  39 

March  26.  A  letter  from  C.  I.  Brown  of  Peoria  arrived  in  this  morning's  mail  con- 
taining a  draft  on  the  First  National  Bank  of  this  city  for  $80.00  (Incoming  Paper  No. 
50).  The  draft  was  drawn  by  the  Commercial  German  Nat'l  Bank  of  Peoria,  and  was 
sent  by  Mr.  Brown  in  payment  for  the  furniture  shipped  to  him  on  the  17th.  Issue  a 
receipt  to  Mr.  Brown. 

Bookkeeping.  The  bank  draft  is  an  order  for  the  First  National  Bank  to  pay  us 
money,  and  we  will  receive  it  as  cash.  Mr.  Brown  bought  the  draft  of  the  Peoria  bank 
for  $80.00,  and  sent  it  to  us;  therefore  his  account  is  to  be  credited. 

Bank  draft.  Study  the  form  received.  You  will  see  that  the  Peoria  bank  orders  the  Chicago  bank 
to  pay  $80.00  to  H.  T.  Raynor.  A  bank  draft  does  not  differ  in  its  nature  from  a  check.  The  form  of  it 
is  different  and  the  party  drawing  it  is  a  bank  instead  of  an  individual  or  firm,  but  it  is  an  order  on 
a  bank  to  pay  a  sum  of  money  to  a  certain  party,  the  same  as  a  check. 

Parties.  The  parties  to  a  bank  draft  are  the  drawer,  in  this  case  the  Peoria  bank;  the  drawee,  in 
this  case  the  Chicago  bank;  and  the  payee,  in  this  case,  H.  T.  Raynor. 

Transaction  No.  40 

March  26.  Deposit  the  bank  draft,  endorsing  it  just  as  you  would  endorse  a  check. 
At  the  same  time  deposit  $50.00  in  currency,  as  you  have  too  much  cash  in  your  cash 
register. 

Transaction  No.  41 

March  27.  A  notice  of  freight  received  arrives  in  the  morning's  mail  (Incoming 
Paper  No.  51).     Sign  it  and  return  it  to  the  railroad  company. 

The  drayman  arrives  with  three  stoves  from  Detroit  and  an  expense  bill  (Incoming 
Paper  No.  52)  which  you  will  pay  by  check.     (See  Transaction  No.  5.) 

Transaction  No.  42 

March  27.  Mr  Raynor  hands  you  an  invoice  from  The  Michigan  Stove  Company 
which  he  has  O.K.'d  as  to  the  prices  and  quantities  Hsted  on  it.  This  is  Incoming  Paper 
No.  53.     Verify  the  extensions,  make  the  entry,  and  file  the  invoice. 

Bookkeeping  Point.     The  journal  explanation  should  state  that  the  bill  is  dated  March  25. 

Transaction  No.  43 

March  28.  Pay  the  salaries  in  cash.  Make  the  proper  entries  and  attend  to  the 
filing. 


120  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

This  is  the  end  of  the  week,  but  you  need  not  post  your  books  or  make  out  a  report 
until  March  31. 

Transaction  No.  44 

March  30.     Nothing  has  been  done  this  month  about  the  balance  due  Balkwill  & 
Patch.     Mr.  Raynor  instructs  you  to  send  them  our  note  at  15  days,  bearing  6%  interest. 
See  Transaction  No.  3,  page  40,  for  directions  for  making  out  a  note. 

Transaction  No.  45 

March  30.  A  sale  ticket  is  handed  to  you.  Make  out  an  invoice,  make  the  entry, 
and  file  the  invoice  as  in  previous  similar  transactions. 

Transaction  No.  46 

March  31.  R.  P.  Smiddy  has  been  attending  to  our  draying  for  city  deliveries,  at 
a  uniform  rate  of  10c  for  each  package,  with  a  minimum  charge  of  25c  for  each  delivery. 
A  bill  for  this  work  is  left  at  our  office  today.  (Incoming  Paper  No.  54.)  Mr.  Raynor 
has  O.K.'d  the  bill  as  to  work  done.  If  the  charges  are  correctly  extended  pay  it  by 
check.     It  is  already  receipted.     Charge  Expense. 

The  item  is  properly  chargeable  to  Expense,  rather  than  to  Mdse.  We  charge  freight  and  drayage 
on  goods  coming  in  to  the  Mdse.  account  because  these  items  constitute  a  part  of  the  cost  of  the  goods 
as  laid  down  in  the  store.  Freight  and  drayage  on  goods  going  out,  however,  are  not  part  of  the  orig- 
inal cost  of  the  goods,  but  are  expenses  incurred  in  the  carrying  on  of  the  business. 

Transaction  No.  47 

March  31.  The  bank  delivers  to  Mr.  Raynor  to-day  a  statement  of  his  account. 
This  statement  is  accompanied  by  the  checks  that  have  been  paid  and  canceled  by  the 
bank  during  the  month. 

The  statement  is  Incoming  Paper  No.  55.  The  checks  returned  are  our  No.  1,  2, 
3,  4,  5  and  6. 

Take  the  six  checks  from  the  outgoing  papers  section  and  have  them  endorsed  by  the 
proper  parties  and  canceled  by  the  bank. 

What  is  the  amount  of  the  unpaid  check?  How  can  you  explain  why  this  check 
has  not  been  canceled  and  returned  with  the  rest? 

Post  all  your  books  up  to  date.  Remember  to  post  the  total  of  sales  to  the  credit  of 
Mdse. 

Student's  Report  No.  12  should  be  made  out  at  this  time.  Be  sure  you  can  answer 
satisfactorily  all  of  the  questions  on  page  52  before  handing  in  the  report. 

Take  a  trial  balance. 

Make  a  financial  statement,  loss  and  gain  statement,  and  proof.  In  making  the 
statements  use  the  following  inventories: 

Inventories  March  31. 

Merchandise.' $4,885.02 

Furniture  &  Fixtures 665.00 

Expense,  8,000  circulars 34.40 

11  months'  insurance **.** 

Salaries  due  bookkeeper  and  clerk,  2  days 8.57 


STATEMENTS 


121 


Inventories — Continued 

Interest,  Receivable  on  J.  F.  Sprague's  note,  **  days *.5M« 

Receivable  on  W.  H.  Harrison's  note,  **  days *.** 

Payable  on  note  favor  Ford  &  Johnson  Co.,  **  days.  .  .  .** 

Outlines  for  the  two  statements  follow.     These  outlines  show  the  arrangement  of 
the  statements,  but  the  amounts  are  to  be  supphed  by  you. 


Financial  Statement,  March  31,  19 — 


Cash 

Furniture  &  Fixtures 

Merchandise 

Notes  Receivable 

Harvard  Hotel  Co. 

A.  F.  Harvey 

C.  E.  Birch 

A.  E.  Robson 
Louis  N.  Powers 

B.  A.  Dalton 
Expense  Invtys 

Interest  Invtys 


Assets 


Inventory 
Inventory 


66*5 

4885 
**** 

** 


8000  circulars 
11  Mo.  Ins. 

Sprague's  note,  **  ds. 
Harrison's  note,  **d3. 

Total  Assets 


*** 
** 

*** 
** 
34.40 

*4:    **  **    ** 


*** 
*    ** 


** 

00 
02 

** 
** 
** 
** 
** 


Expense  In%'ty 

Notes  Payable 

Michigan  Stove  Co. 

Detroit  Folding  Cart  Co. 

St.  Johns  Table  Co. 

W.  P.  Dunn  Co. 

Heywood  Bros.  &  Wakefield  Co. 

Interest  Invty 


Liabilities 
Salaries  due,  2  ds. 


Note  favor  Ford  &  Johnson,  **  ds. 
Total  Liabilities 
Net  capital 


8.57 

***  ** 

4:4:*  .  ** 

***. 

*** . ** 

**. 

**.** 

.** 

**** . ** 

**** . ** 

Note  that  in  the  above  statement  two  of  the  expense  inventories  are  listed  as  assets,  and  one  as  a 
liabiUty.  Also  note  that  two  of  the  interest  inventories  are  assets,  and  one  is  a  liability.  Give  the 
reason  for  the  classification  in  each  case. 

Note  that  the  assets  are  arranged  in  the  order  of  realization — those  most  easily  converted  into 
cash,  first.  Cash  itself  heads  the  list.  Then  comes  property.  Notes  take  precedence  over  personal 
accounts. 

The  liabilities  are  arranged  in  the  order  of  liquidation — those  which  would  have  to  be  paid  first  are 
placed  first. 

Each  item  taken  from  the  ledger  should  be  preceded  by  a  folio. 


122 


PRACTICAL   OFFICE    WORK   AND    BOOKKEEPING 


Merchandise 


Interest 


Loss  and  Gain  Statement,  March  31,  19 — 
Gains 


(subtract) 

Cost 
Invty 

Cost  of  goods  sold 

Sales 

Cost  of  goods  sold 

Credits                    * 
Cr.  Invty             ** 

4885.02 

(subtract) 

He***  .  ** 

(add) 

**   ** 

(add) 

Debits                    * 
Dr.  Invty 

** 

(sub)     *.** 

Total  gains 

*  ** 


Losses 


Furniture  &  Fixtures  Debits 

(subtract)  Inventory 

Esqjense  Debits 

(add)  Dr.  Invty 

(subtract)  Cr.  Invty 
Total  losses 
Net  gain 


***. 

***. 

*. 

I**!**!*  .  1**I> 

8.57 

***   ** 

**  ,** 

*** . ** 

***  ** 

#t^^^  ,  n**!^ 

Proof 


H.  T.  Raynor's  Investment  March  1 
H.  T.  Raynor's  Net  Gain  for  March 

Present  Worth  as  per  Fin.  St. 


By  comparing  the  two  statements  you  will  see  that  all  inventories  are  used  in  both.  Every  in- 
ventory is  cither  an  asset  or  a  liability  and  appears  as  such  in  the  financial  statement.  Every  asset 
inventory  appears  in  the  loss  and  gain  statement  a«  an  increase  of  some  gain  or  a  deduction  from  the 
amount  of  some  loss.  Every  liability  inventory  appears  in  the  loss  and  gain  statement  as  an  increase 
of  some  loss  or  a  deduction  from  the  amount  of  some  gain. 

To  illustrate:  The  inventory  of  circulars  on  hand  and  the  unexpired  insurance  are  assets  and  appear 
as  such  in  the  financial  statement.  They  appear  in  the  loss  and  gain  statement  as  deductions  from  the 
loss  on  expense. 

The  inventories  of  interest  accrued  on  the  two  notes  receivable  arc  assets  and  appear  as  such  in  the 
financial  statement.  They  appear  in  the  loss  and  gain  statement  as  an  increase  of  the  amount  of  gain 
on  interest. 

The  inventory  of  salaries  due  our  help  is  a  liability  and  appears  as  such  in  the  financial  statement. 
The  same  inventory  appears  in  the  loss  and  gain  statement  as  an  increase  of  the  loss  on  expense. 

The  inventory  of  interest  due  on  notes  payable  is  a  liability  and  appears  as  such  in  the  financial 
statement.  The  same  inventory  appears  in  the  loss  and  gain  statement  as  a  diminution  of  the  gain  on 
interest. 


THE   STOCK   RECORD 


123 


Closing  the  Ledger 

As  soon  as  your  statements  have  been  approved  you  may  proceed  to  close  the  ledger 
accounts  as  follows: 

Close  Notes  Pavable.  The  following  accounts  should  be  ruled  with  a  double  red  line, 
omitting  the  footings  as  they  balance  with  only  one  item  on  each  side:  Palmer  House 
Co.,  C.  I.  Brown,  D.  G.  Boleyn,  The  Ford  &  Johnson  Co.,  Balk  will  &  Patch,  Kimball  & 
Chappell  Co. 

Close  all  loss  or  gain  accounts  into  Loss  &  Gain.  Remember  that  both  Expense 
and  Interest  have  inventories  on  both  sides.  Inventories  should  be  entered  separately 
and  brought  down  as  separate  items. 

Balance. the  proprietor's  account. 

Take  a  balance  of  the  balances.  This  should  correspond  with  the  assets  and  liabilities 
shown  by  the  financial  statement. 

THE   STOCK  RECORD 

Read  what  is  said  on  page  67  about  the  stock  record. 

Prepare  a  stock  record  and  inventory  for  March.  First  rule  up  on  a  loose  sheet 
of  paper  a  form  like  the  following: 


Stock  Record  for  March,  19- 
H.  T.  Raynor. 


article 

Bot. 

Sold 

Left 

Cost  Price 

Amount 

No.  1982  mahogany  chairs 

30 

30 

2 

50 

75 

No.  1684  mahogany  rockers 

45 

2 

43 

5 

663 

243 

67 

No.  184-5  Mission  chairs 

36 

6 

5 

9 

16 

2 

25 

36 

No  417  brass  bed 

15 

1 

14 

12 

168 

The  above  is  only  a  partial  form.  Prepare  a  complete  stock  record.  The  amounts 
in  the  "Bought"  column  are  to  be  ascertained  from  the  inventory  of  goods  on  hand 
March  1  and  from  incoming  bills.  The  items  in  the  "Sold"  column  are  to  be  ascertained 
from  the  sales  book.  The  cost  prices  are  to  be  ascertained  from  the  inventory  on  hand 
March  1  and  from  incoming  bills.  The  total  of  the  "Amount"  column  should  be  $4,885.02, 
which  is  the  amount  of  the  inventory  used  in  making  the  statements. 

This  is  a  very  important  record  in  the  furniture  business,  and  one  which  is  usually  kept  very  care- 
fully by  furniture  dealers,  each  purchase  and  sale  being  recorded  at  the  time  of  its  occurrence.  There 
are  certain  articles  the  storekeeper  must  always  have  on  hand — the  stock  record  will  inform  him  when 
the  stock  is  getting  low.  By  consulting  the  record  frequently,  he  can  also  prevent  over-stocking 
on  any  particular  article.  No  merchant  wishes  to  have  his  money  tied  up  in  stock  that  will  not  be  sold 
for  a  long  time.  The  merchant  is  most  likely  to  be  successful  who  can  "turn  over"  his  investment 
oftenest — that  is,  who  can  keep  his  supply  down  so  nearly  to  the  demand  that  his  sales  during  the  year 
are  two  or  three  times  the  amount  of  his  investment  at  any  time.  He  will  not  plan  to  carry  more  stock 
than  enough  to  last  him  for  a  few  months,  and  will  buy  often  and  in  small  quantities  (unless  he  can  get 
a  liberal  discount  on  a  large  purchase). 

A  large  city  offers  visual  opportunities  to  retail  merchants  to  follow  this  plan,  as  it  is  a  matter  of 
only  a  few  days  or  hours  to  buy  anything  needed  to  replenish  stock.     Some  of  the  smaller  merchants 


124 


PRACTICAL   OFFICE   WORK   AND    BOOKKEEPING 


in  large  cities,  within  easy  reach  of  wholesale  houses,  plan  to  keep  only  one  or  two  samples  of  each 
article  of  furniture.  When  these  are  sold,  new  stock  can  be  ordered  at  once  and  will  be  delivered  to  the 
store  almost  before  the  old  is  sent  out. 

Problems 

1.  An  advertiser  placed  a  full  page  advertisement  in  the  Times  through  an  adver- 
tising agency.  The  space  would  have  cost  him  $500.00  had  he  placed  the  order  direct, 
but  the  agency  was  able  to  secure  a  15%  discount  from  the  newspaper.  The  agency 
made  a  charge  of  15%  of  the  net  bill  for  its  services  in  placing  the  advertisement  and 
preparing  the  copy.     How  much  did  the  advertiser  save? 

2.  B  placed  the  following  advertisements  through  the  C.  Co.  and  advertising  agency: 

Publication.  Value  of  space.  Discount  Net  cost 

Ladies' Home  Journal  $750.00  10%  ***. 

Saturday  Evening  Post  500.00  15%  ***. 

McClure's  Magazine  400.00  12J^%  ***. 


The  C.  Co.  charged  for  services  15%  of  net  cost 


****. 


What  did  the  services  of  the  C.  Co.  cost  Mr.  B.  over  and  above  what  he  would  have 
had  to  pay  had  he  placed  his  advertising  direct? 

3.  The  catalog  price  of  the  X  Z  stove  is  $65.00.  A  dealer  bought  it  at  catalog  price, 
securing  25  and  5%  trade  discounts,  and  also  securing  2%  discount  for  cash.  He  sold 
for  cash  at  catalog  price.     What  was  his  percentage  of  profit,  based  upon  net  cost? 

4.  A  dealer  bought  $1,000.00  worth  of  Mdse.  upon  the  terms  2/10  n/30  ds.  Not 
having  the  money  to  pay  cash,  he  borrowed  it  on  the  tenth  day  at  6%  and  secured  the 
discount.     Did  he  gain  or  lose  by  the  transaction,  and  how  much? 

TWO  WAYS  OF  ASCEETAINING  GAIN 

Condition  I.  No  additional  investment  or  withdrawals  having  been  made  by  the  pro- 
prietor during  a  given  period. 

1.  The  net  gain  of  the  business  for  that  period  is  the  difference  between  the  gains  and 
the  losses  for  the  period. 

2.  The  net  gain  is  also  the  difference  between  the  capital  at  the  beginning  of  the 
period  and  the  capital  at  the  end  of  the  period. 

Illustration: 

The  footings  taken  from  A's  ledger  on  Jan.  31  are  as  follows: 


A  —  capital  account  (unchanged  since  Jan.  1) 

2,500 

00 

Mdse.  (no  Invty.) 

1,800 

00 

2,200 

00 

Expense 

100 

00 

Cash 

2,000 

00 

Notes  and  Accounts  Receivable 

1,600 

00 

Notes  and  Accounts  Payable 

800 

00 

5,500 

00 

5,500 

00 

SUPPLEMENTARY   PROBLEMS  125 

Explanation: 

1.  The  net  gain  is  the  difference  between  the  gain,  $400.00  (shown  by  the  Mdse.  account),  and  the 
loss,  $100.00  (shown  by  the  Expense  account). 

2.  The  net  gain  may  also  be  ascertained  as  follows: 

Assets,  $2,000.00  +  $1,600.00  =  $3,600.00 

Liabilities 800.00 

Net  capital  Jan.  31 2,800.00 

Capital  Jan.  1 2,500.00 

Net  Gain 300.00 


Condition  II.  When  the  proprietor  has  increased  his  investment  or  has  made  a  with- 
drawal during  the  period,  this  must  be  taken  into  consideration  before  the  increase  of  the 
capital  will  agree  with  the  amount  of  gain. 

In  the  above  illustration,  if  Mr.  A  had  withdrawn  $100.00  cash,  the  footings  Jan.  31 
would  have  been: 


A  —  capital  account 

100 

00 

2,500 

00 

Mdse.  (no  Invty.) 

1.800 

00 

2,200 

00 

Expense 

100 

00 

Cash 

2,000 

00 

100 

00 

Notes  and  Accounts  Receivable 

1,600 

00 

Notes  and  Accounts  Payable 

800 

00 

5,600 

00 

5,600 

00 

Explanation: 

1.  The  net  gain  is,  as  before,  the  difference  between  the  gains  and  the  losses  ($400  — $100  =  $300.00.) 

2.  The  withdrawal  of  $100.00  must  be  deducted  from  the  capital  invested  Jan.  1,  and  the  remain- 
der deducted  from  the  net  capital  as  shown  Jan.  31,  in  order  to  find  the  amount  of  gain,  thus: 

Assets  Jan.  31.     Cash $1,900 

Notes  Receivable 1 ,600  3,500 

Liabilities  Jan.  31 800 

Net  capital  Jan.  31 2,700 

Capital  Jan.  1 2,500 .00 

Withdrawal 100.00  2,400 

Gain 300 


126 


PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 


Problems 

I.     The  last  time  Brown's  ledger  was  closed  was  Jan.  31,  19- 
the  ledger  were  as  follows: 


On  Feb.  28,  19—,  the  footings  of 


Brown  (capital) 

6,000 

00 

Real  Estate 

4,000 

00 

Furniture  and  Fixtures 

1,000 

00 

Mdse. 

1,700 

00 

1,200 

00 

Expense 

190 

00 

Cash 

2,000 

00 

400 

00 

Notes  and  Accounts  Receivable 

1,500 

00 

1,000 

00 

Notes  and  Accounts  Payable 

1,790 

00 

10,390 

00 

10,390 

00 

Inventories:     Real  Estate,  $4,000.00;    Furniture  and  Fixtures,  $990.00;  Mdse.,  $1,100.00. 
Prepare  two  different  statements,  showing  the  two  different  ways  of  arriving  at  the  amount  of  the 
0et  gain. 

II.  Assume  that  in  the  preceding  case  Brown  withdrew  $150.00  in  cash  for  personal  use  during 
February,  and  that  on  February  15  he  received  a  legacy  of  $1,000.00  in  cash  which  he  added  to  the 
capital  of  his  business.     Show  trial  balance  and  statements  Feb.  28. 

Note.  Problems  very  similar  to  the  foregoing  (although  more  elaborate  in  detail)  are  very  fre- 
quently found  in  examinations  given  to  candidates  for  the  degree  of  Certified  Public  Accountant.  The 
principle  involved  is  that  withdrawals  from  or  additions  to  capital  do  not  reduce  or  increase  profits 
for  the  period. 


Review  Questions.  1.  Describe  the  process  of  transferring  accoimts  from  an  old  ledger  to  a  new 
one.  2.  What  is  an  insurance  policy?  3.  Answer  the  questions  on  the  insurance  policy,  at  the  bottom 
of  page  98.  4.  Describe  how  sale  tickets  are  used.  5.  What  is  an  expense  bill?  6.  What  may  a  depos- 
itor do  if  he  fails  to  bring  his  pass  book  when  making  a  deposit?  7.  What  is  a  "tracer?"  8.  How  many 
words  are  there  in  the  following  telegram:  "Send  me  by  telegraph  $5000.00  at  7:30  p.  M.  tomorrow." 
Write  the  foregoing  telegram  in  ten  words.  9.  What  is  the  meaning  of  the  term  "F.  O.  B.  New  York?" 
10.  What  is  a  bill  of  lading?  11.  Describe  the  "straight"  bill  of  lading.  12.  Describe  the  '  order" 
bill  of  lading.  13.  What  is  a  bank  draft?  Name  and  define  the  parties  thereto.  14.  What  is  meant 
by  trade  discount?  15.  Why  is  a  trade  discount  account  not  kept  in  the  ledger?  16.  How  is  the  net 
amount  of  a  bill  determined  when  the  bill  is  subject  to  a  series  of  discounts  ?  17.  Explain  how  a  series 
of  discounts  might  originate.  18.  State  two  ways  of  ascertaining  the  amount  of  gain  or  loss  for  a  given 
period. 


CHAPTER  V 
BUSINESS  FOR  APRIL 

Transaction  No.  48.  April  1.  Mr.  Raynor  instructs  you  to  pay  the  rent  as  on  March 
2.  Make  the  payment  by  check  and  bring  back  Mr.  Whitney's  receipt  (Incoming  Paper 
No.  56.) 

Write  the  check.  Fill  out  the  check-book  stub  and  deduct  the  amount  of  the  check  from  the 
balance.  Detach  the  receipt  from  the  pad  of  incoming  papers.  Make  the  bookkeeping  entry. 
File  the  receipt  and  the  outgoing  check. 

The  student  is  now  presumed  to  be  familiar  with  the  bookkeeping  and  filing  required  for  simple 
transactions.  From  this  point  on,  specific  directions  for  bookkeeping  and  filing  will  be  omitted  except 
in  connection  with  transactions  involving  features  which  are  unusual  or  with  which  the  student  is  not 
familiar. 

Transaction  No.  49.  April  1.  A  check  is  received  this  morning  from  J.  F.  Sprague  in 
payment  of  his  note  of  Jan.  31  and  interest  at  6%.  The  check  is  Incoming  Paper  No.  57. 

Detach  the  check  from  the  pad.  Is  it  made  out  for  the  right  amount?  If  so,  take  the  note  from 
the  section  of  the  file  marked  "Cash  Register  and  Notes  Receivable"  and  cancel  it.  You  will  do  this 
by  writing  diagonally  across  the  face  in  red  ink,  "Canceled  April  1,  19 — .  H.  T.  Raynor,  by  (your 
initials)."  Make  two  entries  in  the  cash  book,  one  for  the  note  and  one  for  interest.  Fill  out  the 
spaces  under  the  heading  "Disposed  of,' '  in  the  bill  book.  File  the  check.  Return  the  canceled  note 
to  Mr.  Sprague  by  filing  it  with  the  outgoing  papers. 

Transaction  No.  50.  April  2.  Mr.  Raynor  instructs  you  to  settle  with  the  W.  P. 
Dunn  Company  for  the  circulars  bought  of  them  last  month,  paying  by  check. 

Refer  to  the  ledger  for  the  amount  of  this  bill,  and  write  the  check.  Do  not  forget  to  fill  out  the 
check-book  stub.  This  should  always  be  done  before  the  check  is  detached.  Take  the  bill  from  the 
"Invoices  Payable"  section  of  the  file  and  have  it  receipted  by  the  W.  P.  Dunn  Company.  -Attend 
to  the  bookkeeping  and  filing.     . 

Transaction  No.  51.  April  2.  Deposit  the  check  you  received  yesterday.  Do  not 
forget  to  add  the  deposit  to  the  check  book  stub. 

Transaction  No.  52.     April  3.     Mr.  Raynor  has  made  a  sale  for  cash  and  hands  you 

the  sale  ticket. 

Detach  the  sale  ticket  and  verify  its  figures.  Make  out  an  invoice  and  receipt  it.  Take  the 
proper  amount  of  currency  from  the  Currency  Envelope.  Make  two  bookkeeping  entries,  one  in  the 
sales  book  and  one  in  the  cash  book.     Attend  to  the  filing. 

Transaction  No.  53.     April  4.    Deposit  $300.00  in  cash. 
Are  you  remembering  to  add  deposits  to  the  check-book  stub? 

Transaction  No.  54.  April  4.  Mr.  Raynor  instructs  you  to  remit  by  check  to  The 
Michigan  Stove  Co.  the  amount  of  their  bill  of  March  4. 

This  invoice  is  now  in  the  "Invoices  Payable"  section  of  the  file.  Write  the  check.  Do  not 
forget  the  check-book  stub.  Make  the  bookkeeping  entry.  Attach  the  check  to  the  invoice  and 
mail  both  to  The  Michigan  Stove  Company  by  filing  in  the  proper  section. 

Transaction  No.  55.      April  4.     Pay  the  salaries  of  yourself  and  Wm.  Johnson  in  cash. 

127 


128  PRACTICAL   OFFICE    WORK    AND    BOOKKEEPING 

This  is  Saturday  night,  but  you  need  not  post  your  books  or  make  out  a  student's  report  at  this 
time,  as  you  have  had  only  four  days'  transactions  since  the  last  closing  of  the  ledger. 

Transaction  No.  56.  April  6,  A  sale  tfcket  is  handed  to  you.  You  know  what  to 
do. 

Transaction  No.  57.  April  7.  Mr.  Raynor  needs  $100.00  for  his  personal  use. 
He  instructs  you  to  draw  a  check  for  the  amount,  payable  to  "Currency,"  and  give 
it  to  .him. 

Filing.  The  Michigan  Stove  Go's  invoice,  which  we  paid  Saturday,  has  been  receipted  and  re- 
turned to  us.  Take  it  from  the  outgoing  papers  section,  have  the  receipt  written  on  it  and  file  it  with 
the  receipts. 

Transaction  No.  58.  April  8.  An  invoice  is  received  today  from  The  Ford  and 
Johnson  Co.  on  account  (Incoming  Paper  No.  58). 

Detach  the  invoice.  See  that  it  is  OK'd  and  the  quantities  checked.  Verify  the  computations. 
Attend  to  the  bookkeeping  and  filing. 

Transaction  No.  59.  April  9.  Mr.  Raynor  instructs  you  to  buy  $5.00  worth  of  2c 
postage  stamps  for  office  use,  paying  currency  from  the  cash  register. 

Transaction  No.  60.     April  10.     A  sale  ticket  is  handed  to  you. 

Observe  that  the  sale  was  made  on  a  15-day  note  at  6  per  cent.  Look  in  the  pad  of  incoming 
papers  for  the  note  (Incoming  Paper  No.  59). 

Detach  the  sale  ticket  from  its  pad  and  the  note  from  the  pad  of  incoming  papers.  Make  out 
an  invoice  and  receipt  it  in  the  following  words;     "April  10,  19 — .      Received  15-day  note  for  the 

amount  of  this  invoice,  H.  T.  Raynor,  by "     Make  two  entries,  one  in  the 

sales  book  and  one  in  the  journal.     Record  the  note  in  the  bill  book.     File  the  note  and  the  invoice. 

Transaction  No.  61.  April  11.  The  weekly  salaries  are  now  due.  Your  own  salary 
is  paid  in  cash,  but  Wm.  Johnson  has  bought  four  No.  1982  mahogany  chairs  at  cost, 
which  he  takes  instead  of  his  salary.     No  invoice  is  necessary  for  this. 

Take  the  amount  of  your  salary  from  the  cash  register  and  make  an  entry  in  the  cash  book.  Enter 
the  $10.00  sale  in  the  sales  book,  charging  Expense,  with  the  explanation,  "Wm.  Johnson,  in  lieu 
of  salary  for  week." 

It  is  quite  customary  among  business  houses  to  sell  to  employees  at  cost.  Employees  should 
never  abuse  this  privilege  by  buying  goods  for  their  friends  at  this  special  rate,  as  such  an  act  is  dis- 
honest. 

Post  your  books  up  to  date.  You  need  not  take  a  trial  balance.  Close  the  cash 
book. 

Student's  Report  No.  13  should  be  made  out  at  this  time. 

Transaction  No.  62.  April  13,  Louis  N.  Powers  stepped  in  to  the  office  today  and 
made  arrangements  with  Mr.  Raynor  to  give  us  $300.00  in  cash  and  his  60-day  note 
at  6  per  cent  for  the  balance,  to  cover  his  account.     The  note  is  Incoming  Paper  No.  60. 

Detach  the  note  from  the  pad;  take  $100.00  from  the  outgoing  papers  file  and  $200.00  from  the 
currency  envelope.  See  that  the  note  is  correctly  made  out  in  every  respect  and  signed  by  Louis  N. 
Powers.  Consult  your  ledger  to  see  whether  the  amount  received  is  correct.  Write  receipts  on  the 
bottoms  of  the  invoices  covered  by  the  payment.  The  receipts  should  show  that  the  first  invoice  was 
paid  in  cash,  and  that  the  second  was  paid  part  in  cash  and  part  by  note. 

Transaction  No.  63.  April  13.  Deposit  the  $300.00  received  today.  Do  not 
forget  the  check-book  stub. 


A  COMPROMISE  WITH  A  DEBTOR   -  129 

Transaction  No.  64.     April  13.     A  sale  ticket  is  handed  to  you.     • 

Transaction  No.  65.  April  13.  Mr.  Raynor  instructs  you  to  mail  a  check  to  the 
Detroit  Folding  Cart  Co.  in  settlement  of  the  invoice  received  by  us  on  March  13. 

Transaction  No.  66.  April  14.  Mr.  Raynor  has  learned  that  B.  A.  Dalton's  busi- 
ness affairs  are  in  bad  shape  and  thinks  it  likely  that  his  creditors  may  force  him  into 
bankruptcy  very  soon.  Rather  than  risk  the  trouble,  delay,  and  loss  that  bankruptcy 
proceedings  would  result  in,  Mr.  Raynor  has  determined  to  compromise  with  Mr.  Dalton 
and  take  $20.00  spot  cash  for  the  account  against  him.     The  balance  of  the  bill  is  a  loss. 

Take  $20.00  from  the  outgoing  papers  section.  Make  an  entry  in  the  cash  book  crediting  B.  A. 
Dalton,  with  the  explanation  "To  settle  account."  Make  another  entry,  in  the  journal,  debiting 
Loss  and  Gain  and  crediting  B.  A.  Dalton  for  the  amount  of  the  loss.  Follow  this  journal  entry  by 
a  complete  explanation  which  sets  forth  the  conditions  of  the  settlement  in  detail.  Give  Mr.  Dalton  a 
receipt  for  the  full  amount  of  his  account. 

Transaction  No.  67.  April  14.  Mr.  Raynor  instructs  you  to  give  Balkwill  &  Patch 
a  check  for  our  note  in  their  favor  due  today  with  interest. 

Refer  to  your  bill  book  for  the  facts  in  regard  to  this  note.  Compute  the  interest  and  draw  a 
check  for  the  full  amount.  Don't  forget  to  fill  out  your  check-book  stub.  Take  the  note  from  the 
outgoing  papers  section  and  have  Balkwill  &  Patch's  cancellation  written  upon  it.  Make  two  entries 
in  the  cash  book,  and  make  the  proper  memorandum  of  payment  in  the  bill  book.  File  the  canceled 
note  and  the  check. 

Transaction  No.  68.     April  15.     A  sale  ticket  is  handed  to  you. 

Transaction  No.  69.  April  16.  A  check  is  received  from  W.  H.  Harrison  to  cover 
the  amount  of  his  note  in  our  favor  and  interest.  The  check  is  Incoming  Paper  No. 
61.     (See  Transaction  No.   49.) 

Transaction  No.  70.     April  17.     Deposit  the  check  received  yesterday. 

Filing.  The  Detroit  Folding  Cart  Co.  has  returned  the  invoice  we  paid  on  April  13,  receipted. 
Take  the  invoice  from  the  outgoing  pap>ers  file,  have  the  receipt  written  on  it,  and  file  it  properly. 

Transaction  No.  71.  April  18.  Pay  the  salaries  for  the  week.  The  cash  must 
be  secured  from  the  bank  by  a  check  to  currency. 

Post  your  books.     Do  not  post  the  sales  book  total. 

Student's  Report  No.  14  should  be  made  out  at  this  time. 

Close  your  cash  book  and  take  a  trial  balance.  The  trial  balance  should  include 
the  cash  balance  and  the  unposted  pencil  footing  of  the  sales  book. 

Transaction  No.  72.     April  20.     A  sale  ticket  is  handed  to  you. 

Note  that  this  ticket  is  different  from  the  others  which  you  have  received.  It  does  not  contain  the 
name  and  address  of  the  party  to  whom  the  sale  was  made.  Mr.  Raynor  does  not  care  to  keep  ac- 
counts with  parties  making  occasional  small  purchases  for  cash,  and  requests  you  to  open  an  account 
called  "Petty  Cash  Sales."  This  account  will  be  debited  for  all  such  sales,  through  the  sales  book, 
and  will  be  credited,  at  the  same  time,  through  the  cash  book.  When  both  the  debit  and  the  credit 
of  a  given  petty  cash  sale  are  posted,  they  will  balance  each  other,  so  that  the  Petty  Cash  Sales  ac- 
count will  always  balance.  Inspection  of  the  ledger  at  any  time  after  posting  will  show  what  the 
petty  cash  sales  have  amounted  to. 


130 


PRACTICAL  OFFICE   WORK   AND    BOOKKEEPING 


Take  $3.00  from  the  outgoing  papers  section  of  the  file.  No  invoice  is  to  be  made  out.  Make  an 
entry  in  the  sales  book,  debiting  Petty  Cash  Sales.  Make  another  entry  in  the  cash  book,  crediting 
Petty  Cash  Sales. 

Transaction  No.  73.  April  21.  A  freight  notice  is  received  (Incoming  Paper  No, 
62).  Sign  it  and  deliver  it  to  the  railroad  company  by  filing  it  with  the  outgoing  papers. 
Later  in  the  day  the  freight  arrives  and  we  are  handed  an  expense  bill  (Incoming  Paper 
No.  63).     Pay  the  expense  bill  (which  is  already  receipted)  in  currency. 

Transaction  No.  74.  April  21.  Mr.  Raynor  hands  you  the  bill  for  the  goods  just 
received  (Incoming  Paper  No.  64).  It  is  OK'd  and  the  item  checked.  Verify  the 
computation  and  make  the  entry.     File  the  bill. 

Transaction  No.  75.  April  22.  In  accordance  with  Mr.  Raynor's  agreement  with 
the  St.  Johns  Table  Company  you  are  to  mail  them  our  60-day  notes  bearing  6  per  cent 
interest  to  cover  the  two  invoices  for  which  we  owe  them,  each  note  being  dated  as  of 
the  date  of  the  invoice  which  it  covers. 

Make  out  one  note  to  cover  the  invoice  received  March  16,  and  date  it  as  of  the  date  of  the  invoice 
(March  7).  Make  out  another  note  to  cover  the  invoice  received  yesterday  and  date  it  also  as  of  the 
date  of  the  invoice  (April  16). 

Make  a  journal  entry  in  the  following  form : 


St.  Johns  Table  Co 

Notes  Payable 

Notes  Payable 

Remitted  the  St.  Johns  Table  Company  our  notes 
as  follows:  60-day  note  at  6  per  cent.,  dated 
Mar.  *,  to  cover  their  invoice  of  same  date,  $***.**; 
and  60-day  note  at  6  per  cent.,  dated  April  **,  to 
cover  their  invoice  of  same  date,  $**.** 

The  two  notes  payable  are  listed  separately  in  the  above  entry.  They  will  be  posted  separately. 
The  items  in  the  ledger  account  may  then  be  readily  compared  with  the  bill  book  items. 

Take  the  two  invoices  from  the  "InvoicesPayable"  file,  attach  to  them  the  notes  respectively  cover- 
ing them,  and  mail  them  to  the  St.  Johns  Table  Company  by  placing  them  in  the  outgoing  papers  file. 

Transaction  No.  76.     April  23.     A  sale  ticket  is  handed  to  you. 

Transaction  No.  77.  April  24.  Mr.  Raynor  instructs  you  to  give  Heywood  Broth- 
ers and  Wakefield  Company  a  check  for  the  amount  of  the  invoice  bought  of  them  on 
March  24.     Have  them  receipt  the  invoice. 

Filing.  The  St.  Johns  Table  Company  has  returned  the  two  invoices  which  we  paid  by  note 
April  22.  Take  them  from  the  outgoing  papers  section,  have  receipts  written  on  the  bottoms  of 
them,  and  file  them. 

Transaction  No.  78.  April  25.  On  the  1st  of  March  and  again  on  the  1st  of  April, 
Mr.  Raynor  made  attempts  to  collect  $56.75  from  A.  F.  Harvey,  La  Grange,  111.,  for 
goods  bought  on  Feb.  15.  (This  balance  showed  in  the  opening  journal  entry  of  Mr. 
Raynor's  new  books,  March  2.)  He  now  instructs  you,  without  further  parley,  to  draw 
on  Mr.  Harvey  for  the  full  amount  due  us  on  his  account;  this  includes  the  invoices  of 
March  25  and  of  April  15. 


DRAWING    ON    A   SLOW    CUSTOMER 


131 


Before  following  out  this  instruction,  study  carefully  the  form  of  draft  shown  below  and  the 
explanation  which  follows  it. 

Form  of  Draft, 


Explanation:  The  above  is  an  order,  or  demand,  made  by  H.  T.  Raynor  upon  A.  F.  Harvey. 
The  demand  is  made  through  a  bank  rather  than  by  Mr.  Raynor  in  person.  Four  principal  advan- 
tages of  making  collection  in  this  manner  are:  First,  it  is  convenient.  Mr.  Harvey  lives  outside  of 
the  city.  Mr.  Raynor  does  not  need  to  bother  hunting  up  a  collecting  agency.  His  own  bank,  or  any 
bank,  will  attend  to  the  matter.  Second,  it  is  inexpensive.  The  bank's  fee,  which  is  deducted  from 
the  proceeds  of  collection  (or,  in  case  collection  is  not  made,  charged  to  the  drawer)  is  very  small  as 
compared  with  what  a  collecting  agency  would  charge.  Third,  the  chances  of  collection  are  reasonably 
good,  as  many  business  men  dislike  to  let  bankers  know  that  they  are  refusing  to  pay  bills.  Fourth, 
if  payment  be  refused,  the  fact  of  the  refusal  would  thus  be  established  in  a  definite,  formal  manner. 
The  drawer  would  no  longer  be  in  doubt  as  to  whether  the  drawee  intended  to  pay,  and  might  proceed 
at  once  to  take  legal  steps  to  collect. 

Interpretation :     If  the  above  demand  were  made  in  the  form  of  a  letter,  the  letter  would  read  : 


(To)  A.  F.  Harvey, 
La  Grange,  111. 


Chicago,  111.,  April  25,  19- 


(Dear  Sir): 

At  sight  (t.  e.,  when  you  see  this)  pay  to  the  order  of  the  Merchants  Exchange  Bank,  one  hundred 
fourteen  and  no/100  dollars.  (This  paper  is  given  for)  value  received.  (When  you  have  paid  this  money), 
charge  the  same  to  (the)  account  of. 

(Yours  truly), 

n.  T.  Raynor. 

Parties:  The  parties  to  a  draft  are  the  drawer,  who  "draws,"  or  makes  demand  (in  this  case,  Mr. 
Raynor) ;  the  drawee,  or  party  drawn  upon  (in  this  case,  Mr.  Harvey) ;  and  the  payee  (in  this  case,  the 
bank  or  its  order). 

Write  out  the  draft  upon  a  blank  which  you  will  detach  from  the  pad  of  blank  drafts.  Write  a 
short  letter,  as  short  as  you  can  make  it,  to  the  Merchants  Exchange  Bank,  stating  that  you  are  en- 
closing the  draft  for  "collection  and  deposit."  (That  means  that  you  instruct  them  to  keep  the 
returns  from  the  collection,  as  a  deposit  to  your  account.) 

When  a  drawee  does  not  wish  to  deposit  the  proceeds  of  his  draft,  but  to  receive  them  in  cash, 
he  sends  the  draft  to  the  bank  for  "Collection  and  Returns,"  which  means  that  the  net  proceeds  are 
returned  to  him. 


132  PRACTICAL   OFFICE   WORK   AND    BOOKKEEPING 

Write  another  short  letter  to  A.  F.  Harvey,  notifying  him  that  you  have  drawn  upon  him,  stating 
the  amount  drawn,  and  enumerating  the  items  covered  by  the  draft. 

Note.  No  bookkeeping  entry  will  be  made  at  this  time.  A  memorandum  of  the  fact  that  the 
draft  has  been  drawn,  made  on  the  stub  from  which  the  draft  was  detached,  is  sufficient.  Sometimes 
a  register  (or  memorandum  of  drafts)  is  kept.  The  bookkeeping  entry  is  made  after  the  returns  are 
in.     If  there  are  no  returns,  no  entry  is  made. 

Transaction  No.  79.  April  25.  A  check  is  received  from  C.  E.  Birch  (Incoming 
Paper  No.  65),  which  Mr.  Raynor  informs  you  is  supposed  to  cover  the  invoice  of  goods 
sold  Mr.  Birch  on  March  4  and  Mr.  Birch's  note  of  April  10  with  interest. 

Detach  the  check  from  the  pad  of  incoming  papers  and  ascertain  whether  the  amount  is  correct. 
If  you  find  it  correct,  make  the  entry.  Receipt  the  invoice.  Cancel  the  note  and  deliver  it  to  Mr. 
Birch. 

You  will  observe  that  Mr.  Raynor's  name  is  spelled  incorrectly  on  the  body  of  the  check.  What 
are  you  going  to  do  about  it  when  you  deposit? 

Transaction  No.  80.  April  25.  Pay  the  salaries  in  cash.  If  there  is  not  enough 
currency  in  the  cash  register,  draw  a  check  for  the  entire  amount. 

This  is  the  end  of  the  week.  Post  your  books  and  make  out  Report  No.  15.  Close 
your  cash  book. 

Transaction  No.  81.     April  27.     Deposit  the  check  received  Saturday. 

When  you  endorse  the  check  for  deposit,  write  Mr.  Raynor's  name  as  it  is  spelled  in  the  body 
of  the  check.     Then  write  Mr.  Raynor's  name  again  just  below  this,  spelling  it  correctly. 

Transaction  No.  82.  April  27.  Mr.  Raynor  instructs  you  to  pay  the  Michigan 
Stove  Co.  by  check  the  balance  due  them.  Proceed  as  in  previous  similar  transac- 
tions. 

Transaction  No.  83.     April  28.     Two  sale  tickets  are  handed  to  you. 

The  amounts  on  one  of  the  sale  tickets  are  to  be  filled  in  from  your  list  prices. 

For  the  satisfaction  of  yourself  and  your  partner,  make  an  estimate  of  the  amount  of  profit  made 
today.  Estimate  roughly  the  average  daily  cost  of  doing  business  by  dividing  last  month's  expenses 
by  the  number  of  work  days  in  the  month.  Figure  the  profits  on  today's  sales  by  comparing 
costs  and  selling  prices.  The  diflFerence  will  show  you  approximately  how  much  profit  you  have 
made  to-day. 

Transaction  No.  84.  April  29.  An  invoice  is  received  today  from  S.  Karpen  & 
Bros.  (Incoming  Paper  No.  66).  Observe  that  it  is  dated  April  28  and  that  the  terms 
are  "  30-day  note  at  6  per  cent." 

Detach  the  invoice.  If  it  is  OK'd  and  checked,  make  out  a  note,  dating  it  April  28.  Mr.  Raynor 
will  sign  the  note.  Make  two  bookkeeping  entries,  both  in  the  journal.  The  first  entry  will  credit 
S.  Karpen  &  Bros,  and  the  second  will  debit  them.  Make  the  proper  record  in  the  bill  book.  The 
invoice  is  already  receipted. 

Transaction  No.  85.  April.  30.  A  check  is  received  in  today's  mail  (Incoming 
Paper  No.  67). 

The  check  is  accompanied  by  a  "voucher"  (Incoming  Paper  No.  68).  This  is  a 
form  which  Mr.  Boleyn  uses  in  his  office,  which  he  wants  you  to  sign  and  return  as  a 
receipt. 

Detach  the  check  and  voucher  from  the  pad.  Read  the  voucher  carefully.  As  far  as  you  are 
concerned,  the  voucher  is  nothing  but  a  form  of  receipt  which  Mr.  Boleyn  has  prepared  in  advance 
for  you,  ready  for  your  signature.     He  has  not  returned  your  original  invoice,  as  is  usually  done^ 


A   VOUCHER  133 

because  the  voucher  itself  contains  all  data,  and  enumerates  in  detail  the  items  covered  by  the  pay- 
ment. 

Make  an  entry  in  your  cash  book  for  the  amount  received,  in  the  usual  way.     Fill  out  and  sign 
''the  receipt  form  in  the  lower  right  hand  corner  of  the  voucher  and  return  the  voucher. 

Vouchers.  Some  firms,  rather  than  keep  accounts  with  houses  from  which  they  buy,  use  a 
"voucher  system"  for  keeping  track  of  invoices  payable.  When  an  obligation  is  incurred  a  voucher 
is  made  out  at  once,  and  this  voucher  is  kept  on  file,  or  left  attached  to  its  stub,  until  the  time  for  the 
payment  arrives.  The  voucher  itself  serves  as  a  constant  reminder  that  the  bill  is  unpaid. 
When  the  due  date,  or  date  of  the  maturity  of  the  obligation,  arrives,  the  bill  is  paid.  The  voucher 
is  at  that  time  detached  from  its  stub,  or  taken  from  the  file,  and  mailed  with  the  remittance.  At  the 
bottom  of  the  voucher  is  a  blank  form  in  which  the  payee's  receipt  is  to  be  written.  The  payee  fills 
out  and  signs  this  receipt,  and  returns  the  voucher.  When  the  voucher  is  returned  to  the  office  from 
which  it  went  out,  it  is  filed;  filing  is  facilitated  by  the  fact  that  the  vouchers  are  all  of  the  same  size 
and  shape.  When  bills  are  paid  in  cash,  voucher  forms  are  used  nevertheless,  the  voucher  being  signed 
at  once  by  the  payee.     Vouchers  should  be  issued  for  all  payments. 

Some  houses,  instead  of  using  regular  voucher  blanks,  stamp  voucher  forms  on  the  backs  of  in- 
coming bills,  using  a  rubber  stamp  for  the  purpose.  This  is  very  unsatisfactory  on  account  of  the 
variation  in  size  and  shape  in  the  different  incoming  bills,  and  for  the  further  reason  that  in  any 
event  the  house  would  be  compelled  to  have  on  hand  regular  voucher  forms  for  use  when  cash  pay- 
ments were  made  for  items  for  which  no  bills  were  submitted,  as  for  instance  when  postage  stamps 
were  bought  for  cash. 

Voucher  Bookeeping.  Posting  is  usually  done  direct  from  the  vouchers  themselves  or  from  their 
stubs.  The  voucher  is  therefore  an  integral  part  of  the  bookkeeping  system  of  the  person  paying 
and  must  always  be  promptly  returned  to  him  by  the  payee.  Sometimes  a  Voucher  Register  is  kept 
which  is  similar  in  form  and  nature  to  the  bill  book. 

You  cannot  at  this  time  expect  to  fully  understand  the  voucher  system.  It  is  sufficient  for  your 
present  purpose  if  you  understand  what  a  voucher  is,  and  realize  the  importance  of  returning  promptly 
any  vouchers  which  may  come  to  you  for  signature. 

Do  not  confuse  the  word  "voucher"  as  here  used,  with  the  more  broad  and  general  use  of  the 
word.  Any  receipt  or  paper  evidencing  a  transaction  is  a  voucher  in  a  broad  sense.  You  have  been 
receiving  and  making  out  vouchers  from  the  beginning  of  the  course.  The  paper  you  received 
to-day  is  a  special  form  of  voucher  used  by  Mr.  Bolcyn. 

Transaction  No.  86.     April  30.     Deposit  the  check  received  to  day. 

Transaction  No.  87.     April  30.     A  sale  ticket  is  handed  to  you. 
See  Transaction  No.  72.     Get  the  cash  from  the  outgoing  papers  file. 

Transaction  No.  88.  April  30.  Louis  N.  Powers  steps  into  the  office  today  with 
$100.00  in  cash  which  he  wishes  to  apply  on  his  note  in  our  favor. 

Take  $100.00  in  currency  from  the  ciirrency  envelope.  Take  Mr.  Powers'  note  from  the  "Cash 
Register  and  Notes  Receivable"  file  and  write  upon  the  back  of  it  in  the  place  usually  used  for  en- 
dorsement, the  words,  "April  30,  19 — .  Received  $100.00  on  this  note.  H.  T.  Raynor,  by  (your  in- 
itials)." Give  Mr.  Powers  a  receipt  for  his  money.  The  last  line  of  the  receipt  (preceding  the  sig- 
nature) should  read,  "To  apply  on  note  dated  April  13,  19 — ."  Replace  the  note  in  the  "Cash  Reg- 
ister and  Notes  Receivable"  file.  Attend  to  the  bookkeeping  and  file  the  cash.  Make  a  memorandum 
of  the  part  payment  in  the  "Disposed  of"  columns  of  the  bill  book.  Do  this  by  writing  "April  30" 
in  the  "When"  column,  "$100.00"  in  the  "Amount  Paid"  column,  and  "Cash"  in  the  "How"  col- 
umn, writing  in  small,  neat  figures  close  to  the  line  above  the  space  in  which  you  are  writing,  so  as 
to  leave  plenty  of  room  for  the  entry  which  will  be  made  when  Mr.  Powers  finally  redeems  the  note. 

Transaction  No.  89.  April  30.  August  Reese  has  scrubbed  the  floors  and  cleaned 
the  windows  today.     Pay  him  $2.00  for  his  day's  work. 


134  PRACTICAL  OFFICE  WORK  AND   BOOKKEEPING 

Transaction  No.  90.  April  30.  A.  E.  Robson  pays  $50.00  in  cash  on  account. 
Give  him  a  receipt.     Take  the  currency  from  the  outgoing  papers  file. 

Transaction  No.  91.  April  30.  Draw  a  check  for  $13.33,  the  amount  of  your  salary  up 
to  tonight,  which  check  Mr.  Raynor  will  sign.     Proceed  as  in  previous  similar  transactions. 

Transaction  No.  92.  April  30.  The  bank's  monthly  statement  (Incoming  Paper 
No.  69)  arrives  in  today's  mail,  accompanied  by  ten  canceled  checks. 

The  checks  returned  are  hsted  on  the  statement.  Proceed  as  on  March  31.  There  are  two  out- 
standing checks  this  month.  These  will  have  to  be  taken  into  consideration  in  reconciling  the  bank  balance 
as  per  the  bank  statement  with  the  balance  shown  by  your  check-book  stub.  This  reconcihation  will  be 
shown  by  the  bank  proof,  which  you  will  fill  out  on  this  week's  report. 

You  will  note  that  the  dates  written  opposite  the  checks  listed  in  the  bank  statement  do  not  in  many 
cases  agree  with  the  dates  of  the  checks.  This  is  because  the  date  given  on  the  statement  in  each  case  is  the 
date  of  the  payment  of  the  check  by  the  bank,  which  is  usually  later  than  the  date  on  which  the  check  was 
issued. 

Post  to  date.     The  sales  book  total  should  be  posted  to  Mdse.  at  this  time. 
Close  the  cash  book  and  rule  up  the  sales  book. 
Report  No.  16  should  now  be  made  out. 
Take  a  trial  balance. 

When  the  trial  balance  has  been  approved,  make  statements,  using  the  following 
inventories: 

Merchandise 5032. 02 

Furniture  &  Fixtures 660.00 

Interest  Receivable 

Louis  N.  Powers'  note .  ** 

Interest  Payable 

On  note  favor  The  Ford  &  Johnson  Co.,  **  days  at  6  per  cent * . 

On  note  favor  St.  Johns  Table  Co.,  **  days  at  6  per  cent .  ** 

On  note  favor  St.  Johns  Table  Co.,  **  days  at  6  per  cent .** 

On  note  favor  S.  Karpen  &  Bros.,  *  days  at  6  per  cent .** 

Expense 

10  months'  insurance sj::!; .  HsH* 

Unpaid  salary  due  Wm.  Johnson 5.71 

Observe  that  one  of  the  expense  inventories  is  a  resource,  and  that  the  other  is  a  liability. 

In  making  the  loss  and  gain  statement,  you  will  find  that  this  month  the  losses  ex- 
ceed the  gains.  Rule  up  the  statement  just  as  you  would  ordinarily,  but  subtract  the 
upper  figure  (total  gains)  from  the  lower  figure  (total  losses).  The  result  is  the  net  loss 
of  the  business  for  April.  In  the  proof,  this  must  be  subtracted  from  the  investment 
to  give  the  net  capital,  which  will  then  be  in  agreement  with  the  net  capital  shown 
by  the  financial  statement. 

Make  out  a  stock  inventory  as  you  did  on  March  31.  Its  lesults  should  agree  with 
the  inventory  of  Mdse  given  above. 


MONTHLY    STATEMENTS  135 

When  your  statements  have  been  approved,  close  the  ledger.  The  result  of  the  loss 
and  gain  account  will  be  a  loss  and  this  will  be  closed  to  H.  T.  Raynor's  account,  in 
which  it  will  be  entered  on  the  debit  side. 

After  the  ledger  has  been  closed,  take  a  balance  of  balances. 

Monthly  Statements. 

It  is  the  custom  among  most  business  houses  to  submit  to  their  customers,  usually 
monthly,  statements  of  account.  There  are  many  forms  of  statement  used,  but  the 
form  described  in  the  following  is  probably  the  most  popular  and  the  most  satisfactory. 

First,  let  us  assume  that  the  customer  has  received  an  invoice  every  time  he  has  bought  a  bill 
of  goods.  This  invoice  has  shown  in  detail  the  items  sold  to  him  at  that  particular  time,  enumerating 
the  articles  sold,  the  quantity  and  price  of  each,  and  the  total  of  the  bill.  It  is  not  necessary  that  all 
this  information  be  repeated  in  the  statement,  as  the  customer  should  save  his  invoices,  and  can 
ascertain  the  details  from  them. 

If  statements  are  rendered  monthly,  no  statement  needs  to  contain  more  than  the  transactions 
of  the  month  which  it  covers,  if  the  balance  due  at  the  beginning  of  the  month  be  included. 

The  first  item  on  a  monthly  statement  should  be  the  balance  due  on  the  first  of  the  month,  as 
shown  by  the  last  statement  which  was  rendered.  This  is  followed  by  an  enumeration  of  the  dates 
and  totals  of  the  several  invoices  sold  to  the  customer  during  the  month,  and  the  footing  is  shown. 
Below  this  is  an  enumeration  of  the  dates  and  amounts  of  the  several  payments  that  have  been  made 
during  the  month,  with  the  total  shown.  This  total  is  subtracted  from  the  total  of  debits.  The 
result  is  the  balance  of  the  customer's  account. 

A  statement  is  not  always  to  be  considered  a  demand  for  payment.  If  the  customer  should  buy 
goods  on  long  time  credit  so  that  the  amount  will  not  be  due  for  some  time  after  the  date  when  the 
statement  is  made  out,  the  amount  of  that  invoice  is  shown  on  the  statement  nevertheless,  for  his 
information.  Statements  containing  such  items  are  usually  marked,  '  'This  is  a  statement  of  account 
and  is  not  a  demand  for  payment,"  or  words  to  that  efifect.  Statements  of  accounts  which  are  due 
or  overdue,  often  contain  the  words, '  'Please  remit." 

In  some  lines  of  business,  as,  for  instance,  the  retail  grocery  business,  monthly  statements  often 
show  in  detail  all  articles  sold  during  the  month,  in  spite  of  the  fact  that  the  articles  have  been  listed 
in  detail  in  the  separate  invoices  which  accompanied  the  goods.  This  is  often  done  in  the  retail 
grocery  business  because  many  householders  are  careless  and  fail  to  save  the  invoices.  This  is  called 
an  itemized  statement. 

On  page  128  are  statements  of  C.  E,  Birch's  account  Mar.  31  and  April  30. 

Render  statements  to  all  of  H.  T.  Raynor's  customers  who  owe  anything  on  account. 
The  items  for  the  statements  should  be  taken  from  the  ledger  accounts.  Submit  these 
statements  to  your  teacher  for  approval.  When  approved,  file  them  with  the  outgoing 
papers. 

It  is  not  necessary  to  make  out  statements  to  creditors,  as  they  will  make  out  statements  to  Mr. 
Raynor.     Statements  are  submitted  to  customers  only. 

Partnership  Problems 

1.  A  and  B  are  partners  with  investments  of  $6,000.00  and  $8,000.00,  respectively,  at  the  be- 
ginning of  a  certain  year.  Their  agreement  is  to  share  gains  or  losses  in  proportion  to  their  invest- 
ments. At  the  end  of  the  year  their  combined  investment  is.  $20,000.00.  Neither  partner  withdraw- 
ing any  profit,  what  is  the  investment  of  each? 

2.  C,  D,  E  are  partners  with  investments  of  $4,000.00,  $5,000.00  and  $6,000.00,  respectively. 
Their  agreement  is  that  losses  or  gains  shall  be  divided  as  follows:  C,  25  per  cent;  D,  35  per  cent; 
E,  40  per  cent.  At  the  end  of  the  year  the  business  is  worth  $21,500.00  before  any  profits  are  with- 
drawn. Each  partner  withdraws  J  of  his  gain  and  leaves  the  rest  in  the  business.  What  is  the  invest- 
ment of  each  for  the  following  year? 


136 


PRACTICAL   OFFICE   WORK  AND    BOOKKEEPING 


3.  X  and  Z  are  partners  with  respective  investments  at  the  time  of  going  out  of  business  of 
$8,000.00  and  $12,000.00.  Their  agreement  as  to  division  of  profits  and  losses  is  that  X  shall  receive 
J  of  all  profits  and  bear  J  of  all  net  losses.  The  net  losses  incurred  in  winding  up  the  affairs  of  the 
business  were  $750.00.     How  did  they  divide  the  capital  remaining? 

4.  M,  N  and  O  are  partners  with  respective  interests  of  $8,000.00,  $10,000.00  and  $12,000.00  on 
Jan.  1,  1909.  M  is  a  silent  partner,  drawing  no  salary.  N  draws  a  salary  of  $1,500.00  per  year  and 
O  draws  a  salary  of  $2,500.00  per  year.  Profits  are  divided  equally.  On  Jan.  1,  1910,  the  capital 
of  the  firm  is  $40,000.00  before  the  partners'  salaries  are  paid.  If  all  salaries  and  profits  are  left  in 
the  business,  what  is  the  interest  of  each  partner  on  Jan.  1,  1910? 

5.  Smith,  Brown  and  Jones  are  partners  under  an  agreement  to  divide  profits  and  losses  equally 
after  each  has  been  allowed  7  per  cent  on  his  investment.  Their  investments,  July  1,  1909,  were  as 
follows:  Smith,  $7,500.00;  Brown,  $10,000.00;  Jones,  $15,000.00.  On  July  1,  1910,  the  capital  of 
the  firm  is  $41,350.50,  no  interest  or  profits  having  been  withdrawn  by  any  partner.  What  is  the 
investment  of  each? 


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PRACTICAL   OFFICE    WORK   AND    BOOKKEEPING  137 


REVIEW 

Rules  for  Journalizing 
Pe&ft  Credit 

Cash,  when  cash  is  received  Cash,  when  cash  is  paid  out 

Notes  Receivable,  when  a  note  signed  by  others         Notes  Receivable,  when  a  note  signed  by  others 

is  received  is  disposed  of 

Notes  Payable,  when  we  redeem  our  note  Notes  Payable,  when  we  issue  a  note 

Persons,  when  they  cost  us  value  Persons,  when  they  return  or  produce  us  value 

Real  Estate,  when  it  costs  us  value  Real  Estate,  when  it  produces  returns  through 

sale 
Mdse.,  when  it  costs  us  value  Mdse.,  when  it  produces  returns  through  sale 

Expense,  when  it  costs  vis  value  Expense,  when  items  for  which  it  has  been  debited 

are  disposed  of  for  value  or  rebates  on  such 
items  made  to  us 
Interest,  when  it  costs  us  value  Interest,  when  it  produces  returns 

Loss  &  Gain,  for  the  separate  losses  of  the  business         Loss  &  Gain,  for  the  separate  gains  of  the  business 
The  Proprietor,  for  his  ■withdrawals  and  for  the         The  Proprietor,  for  his  investments  and  for  the 
net  loss  of  the  business  net  gam  of  the  business 

A  thoughtful  inspection  of  the  rules  given  above  will  show  you  that  there  are  but 
three  rules  for  debiting  accounts  and  three  rules  for  crediting  accounts,  as  enumerated 
in  the  following: 

General  Summary  of  Rules 
Debit  Any  Account  Credit  Any  Account 

When  the  thing  it  names  is  received  When  the  thing  it  names  is  disposed  of 

When  the  thing  it  names  costs  us  value  When  the  thing  it  names  produces  returns 

When  the  thing  it  names  occasions  a  loss  When  the  thing  it  names  produces  a  gain 

Further  reflection  should  show  you  that  when  a  thing  is  received  it  costs;  and  that 
when  a  thing  occasions  a  loss,  it  costs.  Also  that  when  a  thing  is  disposed  of,  it  produces 
returns;  and  that  when  a  thing  produces  a  gain,  it  produces  a  return.  The  foregoing 
being  true,  we  can  reduce  our  rules  down  to  a  short  general  rule  that  will  cover  all  cases, 
as  follows: 

GENERAL  RULE.    Debit  the  account  of  that  which  costs;  credit  the  account  of  that  which 
produces  returns. 

Let  us  see  whether  this  general  rule  can  be  applied  to  all  accounts.  Refer  to  the  separate  rules  for 
each  account,  at  the  top  of  the  page.  The  first  one  reads,  "Debit  cash  when  cash  is  received."  Can  we 
apply  the  general  rule,  "Debit  the  account  of  that  which  costs"?  Yes,  because  cash  received  costs  us 
something  of  value  with  which  we  have  to  part  to  get  the  cash.  The  same  applies  to  Notes  Receivable 
and  Notes  Payable — in  order  to  receive  them,  we  must  part  with  something  of  value;  therefore,  they  cost 
us.  In  the  case  of  Persons,  Real  Estate,  Mdse.,  Expense,  and  Interest,  the  separate  rules  as  they  stand 
state  that  these  accounts  are  debited  when  they  cost  us  value.  The  rule  for  debiting  the  Loss  &  Gain 
account  reads,  "Debit  Loss  &  Gain  for  the  separate  losses  of  the  business."  A  loss  is  certainly  a  cost. 
The  rule  for  debiting  the  proprietor  reads,  "Debit  him  for  his  withdrawals."  A  withdrawal  is  certainly 
a  cost  to  the  business.  From  all  of  this,  we  have  determined  positively  that  the  single  rule,  "Debit  the 
account  of  that  which  costs  us  value,"  can  be  applied  in  all  cases. 

Similarly,  it  can  be  shown  that  cash  paid  out.  notes  receivable  disposed  of,  and  notes  payable  issued, 
all  produce  returns,  since  we  always  receive  something  of  value  in  exchange  for  things  we  part  with.  It 
is  also  e\ident  that  gains  are  returns.  From  this  we  deduce  positively  that  the  single  rule,  "Credit  the 
account  of  that  which  produces  returns,"  can  be  applied  in  all  cases. 

Commit  to  memory,  therefore,  the  general  rule  "Debit  the  account  of  that  which 
costs  value;  credit  the  account  of  that  which  produces  returns."  Or,  if  it  seems  more 
clear  to  you,  learn  the  rule,  "Debit  the  account  of  that  which  is  received  or  costs  value; 
Credit  the  account  of  that  which  is  disposed  of  or  produces  returns."  Having  learned 
the  rule,  bear  it  constantly  in  mind  and  apply  it  in  all  cases.  You  cannot  make  a  mis- 
take in  journalizing  if  you  always  remember  this  rule  and  never  violate  it. 


138 


RECAPITULATION    AND    REVIEW 


SUMMARY   OF   DEFINITIONS 

You  now  have  a  practical  working  knowledge  of  bookkeeping  in  its  simpler  forms. 
You  understand  the  fundamental  principles  of  accounting,  and  are  familiar  with  the 
language  of  business.  At  this  point  you  should  thoroughly  master  the  definitions  which 
follow  on  the  next  two  pages,  the  meaning  of  which  should  now  be  very  clear  to  you. 

^A  business  transaction  consists  of  the  exchange  (see  definitions  28  to  33),  between  the  parties  thereto 
(see  definitions  2  to  5),  of  things  of  value  (see  definitions  6  to  18).  'The  parties  to  a  business  transaction 
may  be  individuals,  firms,  or  corporations.  'An  individual  conducting  a  business  is  called  a  proprietor. 
*A  firm  or  partnership  consists  of  two  or  more  persons  who  unite  their  capital  or  efforts,  or  both,  for  the 
purpose  of  carrying  on  a  business.  ^A  corporation  is  an  association  of  individuals,  existing  under  a  state 
charter  and  acting  as  one  individual.  "Things  of  value  which  may  form  the  subject-matter  of  a  business 
transaction  may  be  real  estate,  commodities,  services,  valuable  promises  (written,  oral,  or  implied)  or  any 
other  thing  having  a  value  which  can  be  estimated  in  money.  'Foremost  in  importance  among  valuable 
things  which  may  be  exchanged  are  cash,  property,  services,  written  promises  to  pay 
money,  and  oral  or  implied  promises  to  pay  money.  ^Cash  includes  coin,  currency,  checks,  bank  drafts, 
postal  and  express  orders  and  other  papers  (except  sight  drafts  not  drawn  on  banks  and  demand  notes, 
aside  from  U.  S.  currency)  payable  in  cash  or  on  presentation.  ^Property  may  be  real  or  personal.  Separate 
accounts  are  usually  kept  with  the  different  kinds  of  property,  such  as  real  estate,  furniture  and  fixtures, 
merchandise,  etc.  ^'^Services  which  have  a  monetary  value  may  be  exchanged  for  money  or  other  valuable 
consideration.  ^^Written  promises  to  pay  are  usually  notes  or  accepted  drafts.  ^'An  accepted  draft  is  one 
which  the  drawee  has  agreed  to  pay. 


TWO    PAGE    STATEMENT    FORMS 

Extending  across  pages  130  and  131  are  shown  first  a  Loss  and  Gain  Statement,  and  next,  a  Financial 
Statement,  in  the  two-page  form.  The  Loss  and  Gain  Statement  shown  is  a  sectional  statement.  The 
first  seven  lines  compose  the  "trading"  section,  which  shows  the  profit  on  Mdse.,  debit  items  being  written 
on  the  left-hand  page  and  credit  items  on  the  right.  It  is  separated  from  the  next  section  by  a  double 
ruliag.  The  second  section  shows  the  profits  and  losses  of  the  business,  losses  being  on  the  left-hand  page 
and  gains  on  the  right.     The  first  item  of  gain  is  the  amount  of  the  gain  on  Mdse.,  which  it  will  be  noticed 

LOSS  AND  GAIN  STATEMENT 


Debits 

SH 

^ 

Mdse.               Invty  Jan.  1,  19 — 

Purchases  during  Jan. 

4256 
1264 

75 
50 

Total  cost  of  Mdse.  for  Jan. 
Less  Invty.  Jan.  31 

5521 
4327 

25 
50 

Cost  of  goods  sold 
Gain  on  trading  (Red  Ink) 

1193 
1373 

75 

54 

Furn.  &  Fix.       Dr. 
Cr. 

2567 

750 
210 

29 



Inventory,  Jan.  31 

540 
525 

15 

Expense 

Net  gain  (Red  Ink) 

124 
1255 
1395 

75 
96 
71 

FINANCIAL  STATEMENT 


Assets 
Cash 

Mdse.  Invty  Jan.  31,  19— 
Furn.  &  Fix.  Invty  Jan.  31,  19— 
Notes  Receivable 
Geo.  W.  Arnett 
H.  H.  Keene 

2346 

4327 

525 

469 

52 

26 

7748 

72 
50 

50 
65 
87 
24 

RECAPITULATION    AND    KEVIEW 


139 


"Notes  or  accepted  drafts  in  our  favor  are  called  A'otes  Receivable  or  Bills  Receivable.  "Notes  or  drafts 
which  we  must  pay  are  called  Xotes  Payable.  **Oral  or  implied  promises  to  pay  are  claims  against  persons 
for  debt.  These  you  have  been  taught  to  call  personal  accounts.  ^Hnterest  is  the  use  of  money  belonging 
to  another.  This  is  a  valuable  thing  and  one  which  is  made  the  subject  matter  of  many  business  transactions. 
^''Expense  is  a  name  given  to  all  amounts  expended  for  the  purpose  of  carrying  on  the  business.  When 
such  items  are  not  classified  imder  some  special  title,  they  are  called  expense.  **Separate  records  may  be 
kept  of  certain  classes  of  expense  such  as  rent,  postage,  insm-ance,  etc.,  if  desired. 

^Bookkeeping  is  the  science  of  making  a  systematic  record  of  business  transactions,  ^hese  rec- 
ords are  made  in  books  of  original  entry,  auxiliary  books,  and  the  ledger,  which  is  the  book  of  final  entry. 
*^Books  of  original  entry,  as  the  term  implies,  are  the  books  in  which  the  transactions  are  directly 
recorded  at  the  time  of  their  occurrence.  ^The  journal,  sales  book,  and  cash  book  are  books  of  original 
entry.  ^Books  of  original  entry  are  characterized  by  the  fact  that  in  them  entries  are  made  at  the  time 
of  their  occurrence  and  in  the  order  of  their  occurrence  and  the  fact  that  entries  in  them  are  posted  to 
the  ledger.  ^Posting  is  the  process  of  a  transferring  transactions  from  books  of  original  entry  to  the 
ledger.  ^The  ledger  is  the  book  of  final  entry  to  which  transactions  are  posted.  *The  ledger  is  charac- 
terized by  the  fact  that  in  it  transactions  are  classified  under  their  proper  headings,  in  accounts. 
"Auxiliary  books  are  books  of  memorandum. 

**Every  business  transaction,  as  stated  in  definition  1,  involves  an  exchange  of  values —  one  thing  is 
given,  another  thing  is  received.  "The  thing  which  is  received,  costs  the  business,  and  the  account  with 
that  thing  is  debited,  ^he  thing  which  is  given  or  disposed  of,  produces  a  return,  and  the  account  with 
that  thing  is  credited.     ^^An  account  is  a  list  of  debits  and  credits  affecting  the  same  person  or  thing,  grouped 


has  been  brought  down  from  the  trading  section.  Sometimes  a  loss  and  gain  statement  is  divided  into 
three  or  even  four  sections,  but  usually  two  sections  give  a  sufficiently  elaborate  analysis.  Below  the 
Loss  and  Gain  Statement  is  a  P'inancial  Statement.  The  assets  are  shown  on  the  left-hand  page  and  the 
liabilities  on  the  right.  The  net  capital  is  classed  with  the  liabilities  and  is  written  as  the  last  item  on 
the  liability  side.  The  two  sides  are  exactly  equal  in  total,  and  for  this  reason  this  statement  is  called  a 
"balanced"  statement.  When  the  balanced  form  is  used,  it  is  necessary  to  prepare  the  loss  and  gain 
statement  first,  in  order  to  know  the  amount  of  capital. 

FOR  MONTH  OF  JANUARY,  19— 


Credits 
Sales  of  Mdse.  during  Jan.,  19 — 


Gain  on  trading,  brought  down 
Interest  and  Discbunt      Cr. 
Dr. 


2567 


2567 


1373 
22 


1395 


29 


71 


JANUARY  31,  ig- 


LiABiLiTiEs  &  Capital 
Notes  Payable 
Armstrong  &  Force 
Net  capital,  Jan.  1,  19 — 
Net  gain  as  per  Loss  &  Gain  Statement 
Net  capital,  Jan.  31,  19 — 


6115 
1255 


126 
250 


7371 

7748 


140  RECAPITULATION    AND    REVIEW 

together  under  one  heading  in  the  ledger  for  the  purpose  of  showing  some  particular  result  in  regard  to  that 
thing.  ^To  debit  means  to  charge.  We  debit  the  account  of  the  person  or  thing  which  costs  the  business 
something.  ^To  credit  means  to  give  credit  for.  We  credit  the  account  of  that  person  or  thing  whicb 
produces  value. 

**Accounts  may  be  divided,  as  to  the  results  shown  (see  definition  19),  into  two  general  classes:  (a) 
Those  which  exhibit  as  a  result  either  an  asset  or  a  liability,  (b)  Those  which  exhibit  as  a  result  either  a 
loss  or  a  gain.  The  former  arc  called  Financial  accounts;  the  latter  are  called  Loss  or  Gain  accounts. 
^Single  Entry  bookkeeping  is  a  method  of  bookkeeping  in  which  usually,  accounts  with  persons  and  cash 
only  (all  Financial  accounts)  are  kept.  Hence,  ordinarily,  only  the  debit  side  or  the  credit  side  of  a  trans- 
action is  recorded  and  separate  losses  and  gains  are  not  shown.  ^Double  Entry  bookkeeping  is  a  method 
in  which  a  record  is  made  of  both  debits  and  credits  in  every  transaction.  Accounts  are  kept  with  losses 
and  gains  as  well  as  with  all  assets  and  liabilities,  and  hence  the  progress  of  the  business  can  be  shown  as 
well  as  its  condition,  at  any  time. 

^'  The  purpose  of  bookkeeping  is  to  keep  a  record  of  all  transactions  in  such  a  way  that  the  result  of  any 
account  can  be  determined,  and  that  the  condition  and  progress  of  the  business,  as  a  whole,  can  be  deter- 
mined at  any  time.  ^The  condition  of  the  business  can  be  determined  from  the  Financial  accounts  and 
the  inventories.  ^An  inventory  is  a  list  of  property  showing  the  kinds  and  quantities  on  hand  and  their 
valuations,  ^he  statement  setting  forth  the  condition  of  the  business  is  called  the  Financial  Statement. 
*'The  Financial  Statement  shows  the  assets  and  the  liabilities.  ^Assets,  or  resources,  are  property  on  hand 
or  other  things  of  value  belonging  to  the  business.  ^^Liabilities  are  debts.  **The  difference  between  the 
assets  and  the  liabilities  shows  the  condition  of  the  business  and  is  called  the  Net  Capital,  x>t  Net  Worth,  or 
Net  Investment.  **The  progress  of  the  business  is  its  gain  or  loss.  *'Progress  is  shown  by  accounts  closing 
with  gain  or  loss.  *'The  statement  showing  gains  and  losses  is  called  the  Loss  and  Gain  Statement. 
^Double  Entry  bookkeeping  shows  the  separate  gains  and  losses  of  the  business,  and  the  net  gain  or  loss  can 
be  determined  by  a  comparison  of  gains  and  losses.  Single  Entry  bookkeeping  does  not  show  separate 
gains  and  losses  at  all,  and  the  net  profit  or  loss  can  be  determined  only  by  a  comparison  of  the  Financial 
Statement  taken  at  one  time  with  the  Financial  Statement  taken  at  some  earlier  time. 

Review  carefully  all  of  Chapter  I. 

Review  the  sections  on  Statements  and  Closing  the  Ledger,  pages  56  to  66. 

Review  the  instructions  on  the  Sales  Book,  page  70,  the  Bill  Books,  pages  74-75,  and 
the  Cash  Book,  pages  87  to  90. 

Answer  the  following  questions,  based  on  the  definitions  given  on  this  and  the 
preceding  page.  Each  question  is  followed  by  a  number  indicating  the  number  of  the 
definition  which  will  answer  the  question. 


QUESTIONS 

(1)  What  is  a  business  transaction?'  (2)  What  does  eveiy  business  transaction  involve?** 
(3)  Who  may  be  parties  to  a  business  transaction?^  (4)  What  is  meant  by  "  things  of  value"?*  (5)  Define 
"proprietor".^  (6)  Define  "partnership".*  (7)  Define  "corporation".*  (8)  Name  five  important 
classes  of  things  of  value.''  (9)  What  is  cash?'  (10)  Give  two  general  divisions  of  property.'  (11)  When 
are  services  "things  of  value"?'"  (12)  Name  the  two  principal  kinds  of  written  promises  to  pay."  (13) 
What  is  an  accepted  draft?!^  (14)  What  are  Notes  Receivable?'^  (15)  What  are  notes  Payable?'*  (16) 
What  is  meant  by  "personal  accounts?"'*  (17)  Define  Interest."  (18)  Define  Expense."  (19)  What 
is  bookkeeping?"  (20)  What  are  its  purposes?^  (21)  Name  three  classes  of  books.  Define  and  describe 
each.2o-"  (22)  What  is  an  account?^'  (23)  Define  "debit"  and  " credit ".^^-ss  (24)  Divide  accounts 
into  two  classes.  How  can  you  tell  to  which  class  a  given  account  belongs?^  (25)  What  is  Single  Entry 
bookkeeping?^  (26)  What  is  Double  Entry  bookkeeping?  State  its  principal  advantage.^'  (27)  How 
can  the  condition  of  the  business  be  determined?^  (28)  How  can  the  progress  of  the  business  be  deter- 
mmed?**  (29)  What  is  the  Financial  Statement,  and  what  does  it  show?*"-*'  (30)  What  is  the  Loss  and 
Gain  Statement?*'  (31)  Define  "assets".**  (32)  What  are  " Liabilities" ?**  (33)  What  is  the  difference 
between  assets  and  liabilities  called?** 


PART  II 

PRELIMINARY  WORK  FOR  THE  STUDENT 

Review  the  rules  for  journalizing  given  on  page  129,  Part  I,  and  be  sure  that  you 
have  the  general  rule  committed  to  memory.  Journalize  the  following  exercises,  writing 
your  journal  entries  on  loose  sheets  without  explanations: 

EXERCISE   I 

Jan,  1,  19 — .     H.  R.  McComb,  the  proprietor,  invested  cash,  $1800.00 

Jan.  2.     Pd.  cash  for  the  January  rent,  $50.00. 

Jan.  3.     Bought  Mdse  of  R.  W.  Coriat  on  account,  $400.00. 

Jan.  4.     Sold  for  cash  Mdse  invoiced  at  $40.00. 

Jan.  5.     Gave  our  10-day  note  at  6%  to  R.  W.  Coriat  on  account,  $100.00. 

Jan.  6.     Sold  to  M.  B.  Kelly  Mdse  on  account,  $65.00. 

Jan.  8.  Bought  a  lot  on  Suburban  St.,  for  business  purposes,  $1000.00.  Paid  $500.00 
in  cash,  and  gave  a  15-day  note  bearing  5%  interest  for  the  balance. 

Jan.  9.     M.  B.  Kelly  paid  $40.00  on  account  in  cash. 

Jan.  10.     Paid  R.  W.  Coriat  $150.00  cash  on  account. 

Jan.  11.    The  proprietor  withdrew  $25.00  in  cash. 

Jan.  12.     Received  Jas.  B.  Read's  15-day  note  at  6%  for  Mdse  invoiced  at  $175.00. 

Jan.  13.     Bought  postage  stamps  for  office  use,  $15.00  cash. 

Jan.  15.     Redeemed  our  note  of  Jan.  5  with  accrued  interest,  in  cash. 

Jan.  16.  Accepted  an  offer  of  $1200.00  for  the  lot  on  Suburban  St.  The  buyer 
paid  $250.00  in  cash  and  gave  his  60-day  note  at  6%  for  the  remainder. 

Jan.  17.     M.  B.  Kelly  returned  Mdse  valued  at  $5.00,  for  which  we  gave  him  credit. 

Jan.  18.     Sold  for  cash  250  2c  stamps. 

Jan.  19.    The  proprietor  increased  his  investment  by  $1000.00  cash. 

Jan.  20.     Sold  Mdse  to  A.  N.  Wagner  on  30  days'  credit,  $120.00. 

Jan.  23.  Redeemed  our  note  issued  Jan.  8  by  giving  a  new  note  at  6%  for  the  old 
note  and  accrued  interest. 

Jan.  27.    Jas.  B.  Read  paid  his  note  of  Jan.  12  and  accrued  interest,  in  cash. 

EXERCISE   II 

Feb.  1,  19—.  The  proprietor,  H.  E.  Broker,  invested  cash,  $1500.00;  Mdse,  $1250.00 
and  a  note  in  his  favor  signed  by  W.  L.  Wilcox,  $560.00.  The  note  was  dated  Dec.  20, 
and  was  for  60  days  at  6%. 

Feb.  2.  Bought  Mdse  of  C.  H.  Smith,  $379.00.  Gave  him  in  exchange  our  note 
for  10  days  at  7%,  $270.00;  and  our  30-day  note  at  7%  for  $109.00.  .     , 

Feb.  3.     Billed  to  H.  F.  McClure  Mdse  amounting  to  $416.00. 

Feb.  4.  Sold  to  Fred  W.  Upham  on  account  the  note  signed  by  W.  L.  Wilcox  which 
was  invested  Feb.  1,  discounting  it  at  the  rate  of  5%  per  annum. 

To  find  the  amount  for  which  this  note  was  sold,  add  to  the  face  of  the  note  the  interest  for  60  days 
at  6%;  then  discount  this  total  for  the  length  of  time  the  note  yet  has  to  run,  discounting  at  5%.    The 

141 


142  PRELIMINARY  WORK — PART  II 

amount  credited  to  Interest  &  Discount  is  the  difference  between  the  face  of  the  note  and  the  amount 
for  which  it  was  sold. 

Feb.  5.  Redeemed  our  30-day  note  of  Feb.  2  by  paying  in  cash  the  face  of  the  note 
plus  the  interest  accrued  to  date. 

Feb.  6.    Bought  on  account  of  Wm.  A.  Marshall  &  Co.  Mdse  amounting  to  $650.00. 

Feb.  7.  Received  H.  F.  McClure's  10-day  note  at  6%,  endorsed  by  W.  J.  Hilton, 
for  $250.00,  and  cash  for  the  balance,  to  cover  the  invoice  sold  him  on  Feb.  3. 

Feb.  9.  Clyde  H.  Havens  opened  an  account  with  us  today  by  the  purchase  of  Mdse 
amounting  to  $185.00. 

Feb.  10.  Borrowed  $1000.00  for  60  days  at  10%  from  I.  N.  Marks.  The  rate  being 
usurious,  Mr.  Marks  required  Mr.  Broker  to  add  the  interest  for  60  days  to  the  amount 
borrowed  and  make  him  out  a  non-interest-bearing  note  for  the  full  amount. 

Feb.  11.     Received  Clyde  H.  Havens'  30-day  note  at  6%  for  $100.00. 

Feb.  12.  Redeemed  our  10-day  note  of  Feb.  2  in  favor  of  C.  H.  Smith  as  follows: 
Gave  him  $100.00  in  cash,  to  be  applied  first  on  the  interest  accrued,  and  then  on  the 
face  of  the  note.  Gave  him  a  new  note  for  15  days  at  7%  for  the  balance  due  him  on 
the  first  note. 

Feb.  13.  Clyde  H.  Havens  returned  for  credit  Mdse  which  was  billed  to  him  on 
Feb.  9  at  $8.75,  and  paid  cash  for  the  balance  due  on  the  invoice  of  Feb.  9,  $76.25. 

Feb.  15.  Gave  William  A.  Marshall  &  Co.  our  15-day  note  at  6%  for  the  amount 
of  the  invoice  bought  of  them  on  Feb.  6. 

Feb.  16.  Borrowed  $1000.00  from  the  First  National  Bank  on  our  60-day  note  at 
6%.  The  bank  required  us  to  pay  the  interest  in  advance  in  cash;  we  paid  this  out  of 
the  $1000.00. 

Feb.  17.  Discounted  at  the  Second  National  Bank  our  60-day  note  for  $500.00, 
dated  today.     Rate  of  discount,  6%. 

There  is  no  difference  between  the  "discount"  (bank  discoimt)  mentioned  in  this  transaction  and 
the  "interest"  mentioned  in  the  preceding  transaction.  The  transactions  are  exactly  ahke,  but  stated 
differently. 

Feb.  18.  Presented  H.  F.  McClure's  note  for  payment  today,  and  payment  was 
refused.  We  had  the  note  protested,  for  which  service  we  paid  a  notary  public  25c  protest 
fee. 

A  protest  is  a  formal  statement,  signed  by  a  notary,  that  he  has  personally  presented  a  paper  for  pay- 
ment and  that  payment  was  refused.  This  definitely  estabUshes  the  fact  that  the  paper  has  been  dis- 
honored, and  is  a  necessary  prehminary  to  charging  the  endorser. 

Feb.  22.  Instituted  foreclosure  proceedings  against  a  piece  of  property  owned  by 
H.  F.  McClure,  and  it  was  sold  in  satisfaction  of  our  claim  agamst  him,  viz:  a  note  for 
$250.00  dated  Feb.  7  and  bearing  6%  interest.  The  property  was  sold  by  the  sheriff 
for  $260.00,  and  of  this  amount  $25.00  was  taken  for  court  costs  and  legal  fees.  The 
remainder  was  turned  over  to  us. 

Feb.  27.     Redeemed  our  note  of  Feb.  12  and  interest,  in  cash. 

EXERCISE   III 

March  1,  19 — .  Discounted  at  the  bank  a  non-interest-bearing  60-day  note  which 
we  held  against  R.  W.  Masters.  The  note  was  for  $600.00,  and  was  dated  Feb.  13.  The 
rate  of  discount  charged  was  6%. 


JOURNALIZING  EXERCISES  J43 

March  2.  Discounted  at  the  bank  H.  M.  McGuire's  note  in  our  favor  for  $564.50 
bearing  5%  interest.  The  note  was  dated  Jan.  31,  and  was  to  run  for  90  days.  The  rate 
of  discount  was  4%. 

March  3.  Redeemed  in  cash  our  note  for  $450.00  in  favor  of  D.  C.  Walsh.  The 
note  was  dated  60  days  ago  and  bore  4^%  interest. 

March  4.  On  Feb.  2  we  issued  a  note  in  favor  of  M.  J.  Kingsley  for  $600.00  at 
6%  maturing  April  3.  Mr.  Kingsley  offered  to  allow  us  to  discount  this  at  5%  and  we 
gave  him  our  check  for  the  amount  due. 

March  5.  Sold  to  J.  H.  Marion  for  cash  a  60-day  note  which  we  held  against  B.  F. 
Adams.  The  note  was  for  $750.00,  was  dated  Feb.  1,  and  bore  6%  interest.  Mr.  Marion 
charged  for  discounting  it  at  the  rate  of  5%  per  annum. 

March  6.  J.  H.  Osborne  endorsed  over  to  us  on  account  a  30-day  note  signed  by 
H.  M.  Johnson.  The  note  was  for  $425.00,  was  dated  Feb.  16,  and  bore  6%  interest. 
We  accepted  it  at  its  present  worth. 

March  7.  Paid  in  cash  J.  C.  Clemens'  invoice  for  Mdse  amounting  to  $376.00.  The 
invoice  was  dated  Jan.  15  and  was  sold  on  30  days'  credit  with  the  understanding  that 
interest  would  be  charged  at  the  rate  of  6%  per  annum  after  maturity. 

March  8.  Our  account  against  B.  E.  Stone,  amounting  to  $150.00,  fell  due  on  Jan. 
20  last,  but  we  extended  Mr.  Stone's  credit  on  condition  that  he  pay  us  7%  interest  after 
maturity.     Stone  paid  his  account  and  interest  today. 

March  9.  Borrowed  $800.00  cash  today,  giving  in  exchange  our  60-day  note  with 
interest  added  at  the  rate  of  8%. 

March  10.     Loaned  William  Morris  $100.00  today,  accepting  his  10-day  note  at  6%. 

March  10.  Discounted  for  cash  the  note  received  from  William  Morris  today.  The 
rate  of  discount  was  5%. 

March  11.     Paid  cash  for  our  note  issued  on  March  9,  less  discount  at  5%. 

March  12.  Bought  Mdse  of  N.  N.  Carlson  today  invoiced  at  $390.00.  Transferred 
to  him  in  exchange  an  account  which  we  held  against  O,  Nelson,  $120.00,  gave  him  our 
60-day  note  at  6%  for  $75.00,  and  paid  him  cash  for  the  balance. 

March  13.  E.  C.  Jackson  transferred  to  us  an  account  against  Pettibone  and  Co., 
$72.50,  and  gave  us  his  30-day  note  at  6%  for  $56.00,  to  apply  on  account. 

March  15.  Bought  from  C.  C.  Goodyear  for  cash  a  note  which  he  held  against 
Coles  &  Co.  for  $150  00.  The  note  was  dated  March  1,  and  bore  6%  interest.  We 
accepted  it  at  its  face  plus  interest  accrued  to  date. 

March  16.  Paid  H.  W.  Ellis  cash  for  his  business.  The  assets  turned  over  to  us 
were:  Store  and  lot  valued  at  $5600.00;  stock  of  goods  inventoried  at  $3476.50;  an  account 
against  R.  H.  Lorimer,  $156.00;  and  a  note  signed  by  J.  T.  Sullivan,  $84.75,  upon  which 
interest  had  accrued  for  44  days  at  6%. 

DRAFTS 

Study  again  the  form  of  draft  shown  on  page  123,  Part  I,  and  the  explana- 
tion which  follows  it.     Who  is  the  drawer?    The  drawee?    The  payee?     Give  definitions. 

Drafts  are  of  two  kinds,  namely,  sight  drafts  and  time  drafts.  A  sight  draft  is  one 
which  is  payable  "at  sight"  or  upon  presentation.  It  reads,  "At  sight  pay  to,  etc." 
A  time  draft  is  one  which  by  its  terms  is  payable  at  some  later  time,  as  one  which  reads 


144  PKELIMINARY    WORK — PART   II 

"Ten  days  after  sight"   (or  "At  ten  days'  sight,"  which  means  the  same  thing),  or 
"Thirty  days  after  date,"  or  "On  such-and-such  a  date,"  etc. 

To  "honor"  a  draft  is  to  pay  it,  if  it  is  a  sight  draft,  or  to  "accept"  it,  if  it  is  a  time  draft. 

"Acceptance"  is  the  agreement  of  the  drawee  to  pay  the  amount  of  the  draft,  on  the  day  specified, 
to  the  party  named  therein.  The  drawee  writes  across  the  face  of  the  draft  the  word  "Accepted"  or 
"Good"  or  any  equivalent  term,  with  the  date  and  his  signature,  thus:  "Accepted,  June  5,  19 — ,  John 
Doe."     The  draft  is  then  known  as  an  "acceptance." 

RULES  FOR  JOT7RNALIZING  DRAFTS 

When  you  are  the  one  who  draws,  debit  the  one  in  whose  favor  the  draft  is  drawn; 
credit  the  one  upon  whom  the  draft  is  drawn. 

When  you  are  the  one  drawn  upon,  debit  the  one  who  drew  upon  you;  credit  Cash 
or  other  thing  of  value  disposed  of,  if  it  is  a  sight  draft  and  you  pay  it.  Credit  Notes 
Payable,  if  it  is  a  time  draft,  and  you  "accept"  it. 

When  the  draft  is  drawn  in  your  favor,  debit  cash  or  other  thing  of  value  received, 
if  it  is  a  sight  draft,  and  the  amount  is  paid  to  you;  debit  Notes  Receivable,  if  it  is  a  time 
draft,  and  is  accepted  in  your  favor;  credit  the  person  who  drew  it  in  your  favor. 

The  plan  followed  throughout  this  text  is  that  no  entry  is  made  by  the  drawer  of  a  draft,  at  the 
time  it  is  drawn.  A  memorandum  is  made  of  the  fact  that  a  draft  has  been  drawn,  and  the  entry  is  made 
when  the  payee  reports  that  the  draft  has  been  honored.  It  is  but  fair  to  say  in  this  connection,  how- 
ever, that  many  bookkeepers  make  their  entry  at  the  time  they  draw  a  draft.  They  rely  upon  the  drawee 
to  honor  it,  either  because  they  have  confidence  in  the  drawee  or  because  they  have  a  previous  arrange- 
ment with  him  to  honor  it.     If  payment  is  refused,  the  first  entry  can  then  be  corrected  by  a  counter  entry. 

Drafts  may  be  drawn  to  the  order  of  "Self"  or  "Ourselves,"  in  which  case  the  drawer 
is  also  the  payee.  When  a  draft  drawn  to  the  order  of  yourself  is  honored,  give  the  drawee 
credit  and  debit  cash  (or  other  thing  of  value  received)  if  it  is  a  sight  draft;  if  it  is  a  time 
draft,  and  is  accepted,  debit  Notes  Receivable. 

A  sight  draft  at  no  time  becomes  a  note  payable  or  receivable  to  any  party.  It  is  valueless  until 
honored,  and  when  it  is  honored  the  transaction  becomes  a  mere  payment  from  one  party  to  another. 

A  time  draft  is  of  no  value  until  honored.  When  it  is  "accepted"  it  becomes  of  the  same  nature 
as  a  note  payable  from  the  drawee  to  the  payee. 

DISCOTJNTS 

Trade  Discount. 

When  a  certain  per  cent  is  deducted  from  the  listed  price  of  an  article  to  arrive  at 
the  real  selling  price,  such  a  deduction  is  called  a  trade  discount.  This  deduction  might 
indicate  that  the  price  has  been  lowered  since  the  present  list  price  was  established;  it 
might  be  a  reduction  made  as  an  inducement  for  a  sale;  it  might  be  that  the  house  merely 
uses  trade  discounts  as  a  means  of  regulating  prices  without  changing  catalog  prices;  or 
it  might  be  that  the  same  catalogs  are  sent  to  all  kinds  of  firms  and  the  prices  to  each 
regulated  through  trade  discounts.  Trade  discounts  are  taken  off  of  the  invoices  when 
they  are  made  out,  and  do  not  appear  on  the  books. 

Cash  Discount. 

After  an  article  has  been  sold  at  a  certain  price,  most  houses  will  offer  a  cash  dis- 
count in  order  to  induce  a  payment  of  cash  within  a  certain  time.     For  instance,  a  house 


DISCOUNTS 


145 


might  sell  goods  on  60  days'  time,  but  offer  a  special  discount  of  2%  for  spot  cash  or  for 
cash  in  ten  days.     These  items  are  entered  in  a  "Cash  Discount"  account. 

Discount  for  the  ^se  of  money. 

This  is  classed  with  interest,  the  ledger  account  being  named  "Interest  and  Discount." 
Interest  is  the  use  of  another's  money,  and  the  use  of  another's  money  has  to  be  paid 
for.  When  we  borrow  money  or  when  we  hold  the  money  of  others  beyond  the  time 
when  it  is  due,  we  should  allow  them  interest  for  it  at  the  rate  of  a  certain  per  cent  per 
annum.  On  the  other  hand,  when  we  prepay  accounts  or  notes  not  yet  due,  we  are  allow- 
ing someone  else  to  have  the  use  of  our  money  and  should  charge  for  that  prepayment. 
This  kind  of  a  discount  should  always  be  classed  with  interest. 

Discounf  is  often  allowed  for  the  anticipation  (payment  in  advance  of  their  dating)  of  invoices  which 
have  been  dated  ahead.  This  should  properly  be  entered  in  the  Interest  and  Discount  account,  as  it  is 
usually  based  upon  current  interest  rates,  or  only  slightly  in  advance  of  them.  Most  bookkeepers,  how- 
ever, ignore  the  distinction  that  should  exist  between  cash  discount  and  discount  for  anticipation,  and 
class  them  together  because  it  is  convenient  to  do  so.  When  an  invoice  is  paid,  the  entire  discount,  includ- 
ing both  cash  discount  and  discount  for  anticipation,  is  "lumped"  in  one  item,  which  is  posted  to  the 
cash  discount  account. 

Discount  on  Exchange. 

This  is  a  discount  that  affects  the  banking  business.  When  exchange  sells  below 
par  (100%),  it  is  said  to  be  selling  at  a  discount.  When  it  sells  above  par,  it  is  said  to 
be  selling  at  a  'premium.  Items  of  this  kind  are  entered  in  the  "Premium  and  Discount" 
account.     The  Premium  and  Discount  account  will  not  be  treated  in  this  text. 

An  illustration  follows  which  shows  three  different  kinds  of  discount: 

On  May  1,  19 — ,  A.  L.  Smith  bought  of  C.  D  Brown  a  stove  listed  in  Brown's  catalog  at  $100.00. 
Brown  allowed  Smith  trade  discoiints  of  20%  and  10%  from  the  list  price.  The  invoice  was  made  out 
as  follows: 

Interest  at  the  rate  of  6  per  cent  per  annum  will  be  allowed  for  anticipation  of  biUs. 

Chicago,  111.,  May  1,  19—. 
A.  L.  Smith, 

576  East  Ave.,  City 

TO  0.  D.  BROWN,  DR. 

Terms:  2/10  n/60  Dating:  Sept.  1,  19—. 


To  1  stove 

Less  20%  and  10% 


100 

28 


72 


00 


The  terms  of  the  bill  were  2/10  n/60.  This  means  "Two  per  cent  discount  for  cash  in  ten  days, 
or  the  net  amount  ($72.00)  paid  in  60  days."  Had  Mr.  Smith  taken  advantage  of  the  cash  discount,  he 
would  have  made  the  following  entry  in  his  journal  on  Sept.  11: 


Mdse 


$72.00 


Cash 
Cash  Dis. 


$70.56 
1.44 


The  bill  was  "dated  ahead,"  being  given  the  dating  Sept.  1,  19 — .  (This  is  often  done  when  goods 
are  bought  early  in  the  season,  or  before  their  season.)  Had  Mr.  Smith  decided  to  "anticipate"  the  bill 
by  paying  it  on  May  1,  he  would  have  been  entitled,  according  to  a  strict  construction  of  the  terms  printed 


146  PRELIMINARY    WORK — PART   II 

on  the  invoice,  to  a  discount  on  the  $70.56  for  133  days  (May  1  to  Sept.  11)  at  6%,  which  would  have 
been  $1.56.     Mr.  Smith's  entry  in  this  case  would  have  been: 

Mdse  $72.00 

Cash  $69.00 

Cash  Dis.  1.44 

Int.  &  Dis.  1.56 

As  previously  explained,  however,  the  general  custom  is  to  ignore  the  distinction  between  cash  dis- 
count and  discount  for  anticipation.  According  to  this  general  custom,  the  creditor  would  allow  2% 
cash  discount  and  ^%  more  discount  for  each  month  of  anticipation  (in  this  case,  4  months),  allowing 
a  total  deduction  of  4%  for  payment  any  time  between  May  1  and  May  11.     The  entry  would  be: 

Mdse  $72.00 

Cash  $69.12 

Cash  Discount  2.88 

It  should  be  noted  that  the  amount  of  cash  discount  sho'wn  in  the  above  illustration  differs  slightly 
from  the  accurate  result  secured  in  the  illustration  which  precedes  it.  The  general  custom  will  be  adhered 
to,  however,  in  the  transactions  which  follow,  even  though  it  is  slightly  inaccurate. 

EXERCISE  ON  DRAFTS 
WOBKED  BY  THBEE  STUDENTS 

The  teacher  will  divide  the  student  body  into  groups  of  three.  The  members  of 
each  group  we  will  designate  A,  B,  and  C.  Each  keeps  his  own  set  of  books,  consisting  of 
a  journal  and  a  ledger.     The  exercise  may  be  worked  in  two  or  three  days. 

All  groups  go  through  the  same  procedure,  as  outlined  in  the  following  exercise.  Invoices  should 
be  made  out  for  all  sales,  and  delivered  to  the  proper  parties.  All  cash  payments  are  to  be  made  by  check. 
All  checks  received  must  be  deposited  the  same  day.  If  there  is  no  school  bank,  transactions  with  the 
bank  can  be  carried  on  with  the  teacher,  who  will  receive  deposits  and  paper  offered  for  discount  or  col- 
lection, and  will  make  the  pass  book  entries;  or  a  student  may  be  selected  by  the  teacher  to  act  as  banker. 
All  transactions  or  communication  between  students  must  be  by  correspondence  conducted  under  the 
direction  of  the  teacher.     The  teacher  will  devise  a  method  by  which  mail  may  be  collected  and  distributed. 

Transactions. 

May  1,  19 — .     Three  students,  A,  B,  and  C,  each  invest  $1500.00  in  cash. 

Take  from  the  currency  envelope  the  slip  marked,  "This  slip  represents  $1500.00  in  cash." 

May  1.     The  three  students  invest  Mdse  as  follows: 

A  invests  4000  bu.  com  at  70^, 
B  invests  2800  bu.  wheat  at  $1.00, 
C  invests  5600  bu.  oats  at  50^. 
It  will  not  be  necessary  for  students  to  handle  this  Mdse.     If  the  teacher  thinks  it  necessary,  for 
this  short  exercise,  stock  records  can  be  kept. 

May  1.     Each  student  deposits  all  cash  on  hand. 

Deposit  slips,  checks,  and  all  other  blank  forms  necessary  for  the  work  of  this  exercise  wiU  be  found 
with  your  supplies  for  Part  II.     Use  pages  6  and  7  of  your  old  pass  book. 

May  2.  A  sells  to  B  2000  bu.  corn  at  780;  B  sells  to  C  1400  bu.  wheat  at  $1.10;  C 
sells  to  A  2800  bu.  oats  at  560.  The  buyer  in  each  case  gives  a  check  for  $400.00,  a  30- 
day  note  at  6%  for  $500.00,  and  has  the  balance  charged  to  his  account. 

May  3.     C  sells  to  B  1400  bu.  oats  at  550;  B  sells  to  A  700  bu.  wheat  at  $1.08;  and 


EXERCISE   ON   DRAFTS  147 

A  sells  to  C  1000  bu.  corn  at  77^0.     The  sale  is  made  in  each  case  subject  to  a  sight  draft 
for  three-fourths  of  the  amount  of  the  bill;  balance  on  account. 

Each  student  draws  at  sight  upon  the  student  to  whom  he  sold  today  and  sends  the  draft  to  the 
bank  for  collection.     The  drafts  should  be  made  payable  to  the  order  of  the  bank. 

Each  student  now  has  on  hand  com,  wheat,  and  oats,  and  has  an  accovmt  with  each  of  the  other 
students  of  his  group. 

May  4.  The  bank  collects  the  amount  of  yesterday's  draft  from  each  of  the  three 
students,  who  pay  by  check. 

May  4,  The  bank  reports  to  each  student  that  his  draft  has  been  collected  and  the 
amount  placed  to  his  credit,  less  50^  collection  fee. 

Each  student  should  now  take  his  pass  book  to  the  bank  and  have  the  amount  of  the  credit  entered 
therein. 

May  5.  A  holds  B's  note,  B  holds  C's  note,  and  C  holds  A's  note.  In  each  case 
the  note  is  for  $500.00,  bears  6%  interest,  and  is  due  June  1.  Each  student  now  discounts 
the  note  which  he  holds,  discounting  it  at  the  bank  at  5%. 

Discount  of  this  kind  is  classed  with  interest.  The  ledger  account  should  be  named  "Interest  & 
Discount"  and  all  items  of  interest  or  discount  (except  cash  discount)  entered  in  it. 

To  compute  the  discount,  add  interest  for  30  days  to  the  face  of  the  note,  and  from  the  amoimt  so 
computed  deduct  discount  for  27  days  at  5%. 

Each  student  should  take  his  pass  book  to  the  bank  and  have  the  proceeds  of  the  discoimted  note 
entered  therein. 

May  7.  Each  student  sells  to  the  teacher  100  bu.  corn  at  77  fi,  100  bu.  wheat  at 
$1.10,  and  100  bu.  oats  at  550.  In  each  case  the  sale  is  made  on  a  60-day  note  without 
interest. 

Make  out  the  note  for  the  teacher  to  sign,  and  present  it  to  the  teacher  for  signature  accompanied 
by  an  invoice. 

May  7.     Discount  the  note  just  received,  discounting  it  at  the  bank  at  5%. 
Have  the  proceeds  entered  in  the  pass  book. 

May  8.  A  draws  against  B,  B  against  C,  and  C  against  A,  at  ten  days*  sight,  for 
the  balance  due  on  the  bill  of  May  2. 

Draw  the  draft  in  your  own  favor  and  mail  it  to  the  drawee  for  acceptance. 

May  8.  As  soon  as  the  draft  drawn  today  is  returned  accepted,  discount  it  at  the 
bank  at  5%. 

Have  the  proceeds  entered  in  your  pass  book. 

May  9.  A  sells  to  B  all  corn  on  hand,  at  750  a  bushel;  B  sells  to  C  all  wheat  on  hand, 
at  $1.05  a  bushel;  and  C  sells  to  A  all  oats  on  hand,  at  550  a  bushel.  The  sale  is  in  each 
case  made  for  cash  less  2%,  and  is  paid  for  by  check. 

A  Cash  Discount  accovmt  should  now  be  opened. 

May  10.  Each  student  buys  from  the  teacher  for  cash  less  2%,  as  follows,  paying 
by  check:  B  buys  1000  bu.  corn  at  700,  and  1400  bu.  oats  at  500;  C  buys  700  bu.  wheat 
at  $1.00,  and  1000  bu.  corn  at  700;  and  A  buys  1400  bu.  oats  at  500,  and  700  bu.  wheat 
at  $1.00. 

To  save  the  teacher  trouble,  each  student  may  write  out  the  invoice  for  the  teacher  to  use  in  bill- 
ing these  goods. 


148  PRELIMINARY   WORK — PART   II 

May  11.  C  sells  to  B  all  corn  on  hand,  at  760  per  bu.;  A  sells  to  C  all  wheat  on  hand, 
at  $1.09  per  bu.;  and  B  sells  to  A  all  oats  on  hand,  at  560  per  bu.  The  terms  in  each  case 
are  cash  less  2%. 

May  18.  The  bank  presents  to  each  student  a  draft  due  today  which  the  student 
pays  by  check.     (No  interest.) 

May  19.  Each  student  now  sells  out  all  Mdse  on  hand  to  the  teacher,  who  gives 
a  non-interest-bearing  60-day  note  for  the  amount  of  the  invoice  in  each  case.  A  sells 
his  oats  at  560;  B  sells  his  corn  at  750;  and  C  sells  his  wheat  at  $1.10. 

Make  out  the  note  for  the  teacher  to  sign,  as  before.  Present  it  for  signature,  accompanied  by  an 
invoice. 

May  19.     Discount  at  the  bank  at  5%  the  note  just  received. 
Have  the  proceeds  entered  in  your  pass  book. 

May  20.  Each  student  owes  an  interest-bearing  note  which  is  held  by  the  bank, 
duo  June  1.  The  bank  consents  to  having  these  notes  discounted  at  4%  by  the  makers. 
Each  student  therefore  discounts  the  note  which  he  owes,  giving  the  bank  his  check  for 
the  amount  due  on  it. 

May  21.  Post  your  journal,  putting  three  accounts  on  each  ledger  page.  Take  a 
trial  balance.     Make  statements.     Close  your  ledger. 

FUNDAMENTAL   PRINCIPLES   OF  BOOEEEEPINQ 

When  you  go  out  from  school  and  into  the  business  world,  you  may  never  have 
occasion  to  work  on  a  set  of  books  exactly  like  any  set  you  have  had  in  school.  This 
should  not  surprise  you.  You  have  opportunity  while  in  school  to  work  on  only  six  or 
seven  different  sets  of  books  at  most,  and  there  are  thousands  of  accounting  systems 
used  in  business,  no  two  of  which  are  alike  in  every  detail.  Even  an  experienced  book- 
keeper, in  going  from  one  position  to  another,  would  find  it  necessary  to  familiarize  him- 
self with  many  new  features. 

In  respect  to  its  exact  details,  every  bookkeeping  system  differs  more  or  less  from 
every  other.  But  in  respect  to  its  underlying  principles,  every  system  is  exactly  like 
every  other.  It  is  for  you  to  learn  what  the  fundamental  principles  of  bookkeeping  are, 
and  how  to  apply  them  to  the  varying  conditions  of  business,  trade,  and  accounting — 
to  learn  how  to  construct  a  set  of  books  that  will  show  the  facts  and  results  which  you 
want  shown.  First  make  the  principles  your  own,  and  then  familiarize  yourself  with 
as  many  as  possible  of  the  mechanical  modifications  of  which  those  principles  are 
susceptible. 

Among  the  most  important  principles*  underlying  all  double  entry  bookkeeping  are: 

1.  Equal  debit  and  credit 

2.  Classification 

3.  Condensation 

4.  Analysis 

1.     The  principle  of  equal  debit  and  credit. 

This  principle  you  have  already  learned  in  your  study  of  journalizing. 

*It  is  contended  by  some  that  the  word  "principle"  as  applied  to  a  truth  of  bookkeeping,  is  a  mis- 
nomer; that  bookkeeping  deals  with  processes  and  has  characteristics,  but  not  "principles." 


FUNDAMENTAL   PRINCIPLES   OF   BOOKKEEPING  149 

2.  The  principle  of  classification. 

The  sales  book  is  an  illustration  of  this.  Items  of  a  similar  kind  are  segregated  (put  by  themselves), 
so  that  desired  facts  in  regard  to  that  class  of  transactions  can  be  readily  secured.  (If  there  were  no  such 
thing  as  a  sales  book,  the  total  sales  for  a  given  period,  for  instance,  could  be  ascertained  only  by  a  laborious 
search  through  the  journal,  or  through  old  sales  tickets.)  This  principle  of  classification  finds  expression 
in  many  ways.  Special  columns  can  be  kept  in  the  cash  book  for  Expense,  Cash  Discount,  Merchandise 
Sales,  etc.  Journals  can  be  ruled  with  many  columns,  and  entries  may  be  classified  through  the  use  of 
the  columns.  Purchases  may  be  set  by  themselves  in  an  invoice  book  similar  in  nature  to  the  sales  book. 
And  so  on. 

3.  The  principle  of  condensation. 

This  is  closely  allied  to  the  principle  of  classification.  When  entries  of  a  certain  kind  are  classified 
(as  in  the  sales  book),  they  occupy  less  space  than  they  would  in  a  journal,  and  labor  in  posting  is  saved 
as  well.     This  is  condensation.     It  is  economy. 

4.  The  principle  of  analysis. 

The  expense  account  may  be  used  as  an  illustration  of  this.  As  you  have  handled  it  thus  far,  there 
has  been  no  attempt  at  an  analysis  of  expenses,  except  that  Interest,  which  is  sometimes  entered  as  Expense, 
has  been  kept  in  a  separate  account.  You  might,  however,  have  kept  a  separate  account  with  Adver- 
tising, another  with  Salaries,  another  with  Insurance,  etc.  Whether  or  not  a  separate  account  is  to  be 
kept  for  a  certain  class  of  expenses,  depends  entirely  upon  whether  or  not  it  is  considered  necessary  or 
desirable  to  know  how  much  that  particular  item  of  expense  amounts  to. 

Many  other  principles  of  accounting  might  be  named,  but  the  above  are  the  most 
important.  It  would  be  difficult  to  find  any  set  of  books  worthy  the  name  which  did 
not  utilize  all  of  them  to  a  greater  or  less  degree.  The  number  and  kind  of  books  used 
and  accounts  kept  in  any  business  depends  entirely  upon  the  character  and  scope  of  the 
business  and  the  information  desired.  Whatever  books  and  accounts  are  kept,  how- 
ever, the  principle  of  equal  debits  and  credits  must  always  be  observed  (if  a  double  entry 
system  is  used),  and  the  principles  of  classification,  condensation,  and  analysis  will  be 
made  use  of  to  a  gi'eater  or  less  extent. 

In  the  wholesale  boot  and  shoe  business  which  follows,  merchandise  is  bought  and  sold  on  30  or 
60  days'  time.  Discounts  are  secured  from  creditors  for  early  cash  payments,  and  discounts  are  given 
to  customers  for  early  cash  payments.  This  business  condition  makes  it  advisable  that  special  columns 
be  kept  on  both  sides  of  the  cash  book  in  which  cash  discounts  may  be  entered.  This  is  an  illustration 
of  the  fact  that  the  nature  of  the  business  itself  regulates  the  character  of  the  books  used. 

The  wholesale  boot  and  shoe  business  is  a  business  in  which  a  great  deal  of  freight  is  received,  and 
many  shipments  made;  this  necessitates  the  use  of  a  separate  account  for  Freight.  A  great  deal  of  adver- 
tising is  done,  and  a  separate  account  with  Advertising  is  considered  desirable.  This  illustrates  the  fact 
that  the  number  and  kind  of  accounts  kept  depends  upon  the  character  of  the  business. 

The  special  columns  in  the  cash  book  illustrate  classification  and  condensation.  The  Cash  Dis^ 
count,  Freight,  and  Advertising  accoimts  exemplify  the  principle  of  analysis. 

Make  up  your  mind  now  that  you  will  not  be  content  merely  to  learn  what  to  do 
and  how  to  do  it.  Determine  that  you  will  master  the  principles  of  the  science  of  account* 
ing,  not  merely  the  processes  in  the  art  of  keeping  books.  If  you  learn  processes  merely, 
any  set  of  books  you  attempt  will  seem  strange  and  incomprehensible  to  you  because 
it  will  not  be  just  like  some  other  set  you  happen  to  be  familiar  with.  If,  on  the  other 
hand,  you  learn  jmnciples,  all  bookkeeping  will  be  easily  comprehended  by  you — to  learn 
a  new  set  will  require  nothing  more  than  the  time  necessary  to  familiarize  yourself  with 
the  details. 


BOOT   AND    SHOE   BUSINESS 


Books  used.  The  books  used  in  the  set  which  follows  are:  Journal,  Sales  Book, 
Three  Column  Cash  Book,  Ledger,  and  Bill  Book. 

The  journal,  sales  book,  bill  book,  and  ledger  differ  in  no  respect  from  those  you 
have  been  using. 

THE  THREE   COLUMN  GASH  BOOK 
Explanation  of  Dr.  Side.     (See  form  below.) 

The  first  column  is  used  for  petty  cash  sales.  Items  of  cash  received  from  petty 
cash  sales  will  be  entered  in  this  column.  This  will  include  all  cash  sales  except  those 
made  to  parties  having  accounts  on  our  books.  Items  entered  in  this  column  will  be 
checked  in  the  folio  column  and  not  posted  separately.  When  the  books  are  closed,  the 
footing  of  this  column  will  be  posted  to  the  sales  book. 

The  second  column  is  for  cash  discounts  allowed  to  customers.  When  a  customer 
pays  for  a  bill  of  goods  (and  in  this  business  most  bills  will  be  paid  for  separately  when 
due)  the  amount  of  cash  discount  allowed  him  is  entered  in  the  second  column  and  the 
net  amount  received  from  him  is  entered  in  the  last  column,  which  is  headed  "General," 
on  the  same  line.  Both  the  discount  and  the  net  amount  received  are  posted  to  the 
credit  of  the  customer's  account  in  the  ledger  (the  amount  from  the  General  column  being 
posted  first,  and  the  discount  being  entered  on  the  line  below  it),  and  the  proper  folio 
is  entered  in  the  L.  F.  column.     The  total  of  the   discount  column  is  posted  to  the 


19- 

-. 

CASH  DR. 

Petty  Cash 
Sales 

Cash  Dis. 
Dr. 

General 

June 

1 

/ 

Balance 

4140 

50 

4 
5 
5 

1/ 

Petty  Cash  Sale 
E.  E.  Merville 
Expense 

14  pre.  Men's  R.  G.  Blu.  at  2.50 
Inv.  of  May  26  less  1% 
Merville  Pd.  Exch.  in  advance 

35 

SO 

78 

85 
15 

6 

V 

Petty  Cash  Sales 

For  the  day 

23 

65 

*** 
* 

** 

12 

Frazin  &  Oppenheim 

Inv.  of  this  date  less  1% 

** 

** 

3 

85 
** 

252 
** 

95 
** 

25 
30 
30 

DeMuth  &  Co. 
Mdse  Sales  Cr. 
Cash  Discount  Dr. 

Inv.  of  June  15  less  1% 
Entered  in  Sales  Book 

2 

03 
** 

200 
** 

77 

** 

** 

** 

* 

- 

Balance 

**** 

** 

July 

1 

V 

**** 

** 

(The  above  is  an  illustration  of  form  only) 
150 


THE  THREE  COLUMN  CASH  BOOK 


151 


debit  of  Cash  Discount  in  the  ledger  at  the  time  of  closing.     The  net  amount  received 
is,  as  it  stands,  a  debit  to  Cash. 

All  other  items  of  cash  received  are  entered  in  the  General  column.  They  are  posted 
to  the  credit  of  the  proper  accounts  in  the  ledger,  and  the  folio  entered  in  the  L.  F.  column. 

Explanation  of  the  Or.  Side.     (See  form  below.) 

Items  of  expense  are  entered  in  the  first  column.  They  are  not  posted  separately, 
but  a  check  mark  is  placed  in  the  folio  column  and  the  total  is  posted  to  the  debit  of 
Expense  at  the  time  of  closing  the  books. 

The  second  column  is  for  cash  discounts  allowed  to  us  by  creditors.  When  we  pay 
a  bill  and  secure  a  cash  discount  on  it,  the  amount  of  the  discount  is  entered  in  the  second 
column  and  the  amount  of  the  net  payment  is  entered  in  the  last  column,  on  the  same 
line.  Both  items  are  posted  to  the  debit  of  the  party  paid,  and  the  proper  page  number 
written  in  the  L.  F.  column  The  total  of  the  discount  column  is  posted  to  the  credit 
of  Cash  Discount  at  the  time  of  closing  the  books.  The  amount  of  the  net  payment  is, 
as  it  stands,  a  credit  to  Cash. 

All  other  items  of  cash  paid  are  entered  in  the  general  column,  from  which  they  are 
posted  to  the  proper  accounts  in  the  ledger,  and  the  folio  entered  in  the  L.  F.  column. 

Balancing  the  Three  Column  Cash  Book.  Rule  a  single  line  across  the  first  column 
on  the  debit  side  and  add.  Post  to  the  sales  book,  dating  the  entry  as  of  the  date  of 
closing,  and  using  the  explanation  "Entered  in  Sales  Book."  In  the  L.  F.  column  write 
the  page  of  the  sales  book  to  which  the  total  was  carried.  Write  the  cash  book  page 
in  the  folio  column  of  the  sales  book.  Rule  a  double  line  under  the  amount  posted,  rul- 
ing across  one  column  only.  Write  the  total  of  this  column  in  the  general  column  just 
opposite  where  it  now  appears,  so  that  it  will  be  added  in  with  the  cash  received. 

19—.  CASH  CR.      . 


1 
1 

3 
6 

30 
30 
30 

1/ 

Expense 

Cash  Dis. 
Cr. 

General 

June 

Expense                            §%  taxes  on  ^  of  $35000.00 
Guthmann,  Carpenter  & 

Telling                        Inv.  of  this  date 
Bradley  &  Metcalf  Co.    Inv.  of  May  25  less  4% 
Expense                            Bookkeeper's  Sal'y  for  week  $20 

Stenographer's  Sal'y  for  week  $16.5() 

Expense  Dr. 
Cash  Discount  Cr. 

Balance  {Red  Ink) 

35 
36 

** 

50 

** 

23 
* 

84 
07 

** 

** 

125 
553 

*** 
*** 
*** 

*** 

*** 

16 
76 

** 
** 
** 
** 
** 

*** 

** 

** 

= 

*=:: 

**** 

** 

(The  above  is  an  illustration  of  form  only) 


152  BOOT    AND    SHOE    BUSINESS 

Rule  a  single  line  under  the  second  column,  on  the  same  line  with  the  double  line 
just  ruled.  Add  the  column.  Post  the  total  to  the  debit  of  Cash  Discount,  using  the 
explanation  "Cash  Discount  Dr."  Rule  up  this  column  the  same  way  you  ruled  the 
first  column,  but  do  not  carry  the  total  into  the  General  column,  as  it  is  not  a  debit  of  cash 
(it  was  posted  to  the  debit  of  Cash  Discount). 

Post  the  footing  of  the  Expense  column  on  the  credit  side  to  the  debit  of  Expense 
and  also  write  the  amount  in  the  General  column  of  the  cash  book,  credit  side,  on  the 
same  line.  Post  the  footing  of  the  middle  column  to  the  credit  of  Cash  Discount;  but 
do  not  vxrite  this  amount  in  the  General  column,  as  it  is  not  a  credit  of  cash. 

Insert  small,  neat  lead  pencil  footings  in  the  two  General  columns.  Ascertain  the 
balance  and  write  it  on  the  credit  side  in  red  ink,  on  the  first  blank  line.  The  debit  totals 
and  rulings  should  be  just  opposite  the  corresponding  totals  and  rulings  on  the  credit  side. 
The  double  rulings  should  extend  clear  across  the  pages,  except  that  they  are  not  ruled  under 
the  explanatory  columns.     Bringthebalance  down  into  the  General  column  on  the  debit  side. 

Accounts  Kept.  Open  in  your  ledger  the  following  accounts,  in  the  order  named 
below,  allowing  for  each  account  one  line  for  the  heading,  one.  line  for  the  ruling,  and  for 
the  items  the  number  of  lines  named. 

Investment 10  lines  Willis  &  Atwood,  365  63d  St 12  lines 

Real  Estate 10  lines  E.  E.  Merville,  Cleveland,  Ohio 11  lines 

Furniture  &  Fixtures 11  lines  S.  H.  East,  Indianapolis,  Ind 8  lines 

Horses  &  Wagons 7  lines  H.  E.  Montgomery,  Hartford,  Conn 8  lines 

Mdse 26  lines  Sundry  Debtors 12  lines 

Interest  &  Discount. 25  lines  C.  O.  D 11  lines 

Cash  Discount  . .    8  lines  Notes  Payable 7  lines 

Freight 8  lines  Guthmann,  Carpenter  &  Telling,  222 

Advertising 10  lines  Franklin  St 12  lines 

Expense 13  lines  H.  F.  C.  Dovenmuehle  &  Son,  248  Monroe 

Loss  &  Gain 14  lines  St 12  lines 

Notes  Receivable 12  lines  Bradley  &  Metcalf  Co.,  Milwaukee,  Wis. .  12  lines 

William  Anderson,  307  W.  69th  St 5  lines  A.  A.  Putnam  &  Son,  207  Monroe  St 7  lines 

DeMuth  &  Co.,  237  State  St. 17  lines  Hamilton  Brown  &  Co.,  St.  Louis,  Mo 12  lines 

Fargo,  Keith  &  Co.,  147  5th  Ave 16  lines  Pingree  &  Co.,  Detroit,  Mich 12  lines 

Frazin  &  Oppenheim,  266  State  St 8  lines  Roberts,  Johnson  &  Rand,  St.  Louis,  Mo.  .   7  lincjj 

O'Connor  &  Goldberg,  144  Clark  St 8  lines  Chicago  Rubber  Shoe  Co.,  153  Franklin  St.  12  lines 

Streeter  Bros.,  187  State  St 15  lines  Great  Western  Factory,  Fond  du  Lac,  Wis.  12  lines 

The  Investment  Account.  This  is  the  capital  account.  There  are  several  partners 
interested  in  the  business,  but  the  accounts  of  the  partners  are  kept  in  a  Private  Ledger 
to  which  no  one  has  access  except  the  partners  themselves.  All  you  know,  and  all  that 
shows  in  the  general  ledger,  is  that  the  total  investment  is  $74747.20,  and  this  you  keep 
in  an  account  entitled  "Investment."  The  investment  account  is  credited  for  the  net 
gain  of  the  business  or  debited  for  its  net  loss. 

The  Interest  &  Discount  Account.  This  account  contains  all  items  of  either  inter- 
est or  discount  allowed  or  charged  for  the  use  of  money. 

A  strict  observance  of  the  distinction  between  cash  discount  and  discount  for  anticipation  would  necess- 
itate including  items  of  discount  for  anticipation  in  this  account.  This  distinction  will  not  be  observed, 
however,  in  the  transactions  which  follow,  but  the  general  custom  will  be  adhered  to  of  "lumping"  cash 
discount  and  discount  for  anticipation  in  a  single  item  and  entering  it  as  cash  discount.  See  Discount  for 
the  use  of  money,  page  137;  and  Dating  bills  ahead,  page  146. 


ACCOUNTS   KEPT  153 

The  Cash  Discount  Account.  This  account  is  debited  with  the  total  of  the  discounts 
allowed  to  customers,  as  shown  on  the  debit  side  of  the  cash  book.  It  is  credited  with 
the  total  of  the  discounts  secured  from  creditors,  as  shown  on  the  credit  side  of  the  cash 
book.  "Cash  discount"  will  be  understood,  in  the  transactions  which  follow,  to  incluSe 
any  additional  discount  that  is  allowed  or  charged  for  anticipation.  The  difference 
between  the  debit  and  credit  sides  is  the  gain  or  the  loss  on  cash  discount;  it  is  closed 
to  Loss  and  Gain. 

The  Freight  Account.  Items  paid  for  freight  are  charged  to  this  account  instead 
of  to  the  Mdse  account.  In  the  shoe  business  the  buyer  is  usually  supposed  to  bear  the 
freight  expense.  When  we  buy  Mdse  from  out  of  the  city  there  will  be  a  freight  bill  to 
pay.  Usually  this  will  be  paid  directly  to  the  railroad  company,  but  if  for  any  reason 
the  house  shipping  to  us  should  prepay  the  freight  charges,  then  payment  for  the  freight 
should  be  made  to  them.  When  we  sell,  the  goods  are  sold  "F.  O.  B.  Chicago,"  which 
means  that  the  house  buying  from  us  must  bear  the  freight  expense.  If  for  any  reason 
we  should  prepay  the  freight  charges,  we  would  debit  the  buyer,  and  not  debit  freight. 
The  freight  account  will  therefore  show  nothing  but  the  cost  of  freight  coming  in.  In 
making  the  loss  and  gain  statement,  freight  must  be  shown  as  an  increase  of  the  cost 
of  Mdse;  and  in  closing  the  ledger  the  freight  account  must  be  closed  into  the  Mdse  account 
before  the  Mdse  account  is  closed. 

Advertising.  This  is  a  special  account  which  will  contain  items  of  advertising  which 
you  have  been  in  the  habit  of  charging  directly  to  Expense.  The  total  cost  of  advertis- 
ing will  show  in  the  loss  and  gain  statement  as  an  increase  of  the  cost  of  expense,  and 
th)^  advertising  account  in  the  ledger  will  be  closed  into  the  expense  account  before  the 
ense  account  is  closed. 

Sundry  Debtors.  Occasionally  you  will  make  a  sale  to  some  house  which  has  no 
regular  account,  and  does  not  buy  often  enough  to  justify  you  in  opening  one.  Charges 
for  such  sales  may  all  be  entered  under  the  general  head  "Sundry  Debtors."  In  posting 
these  items,  allow  two  lines  for  each.  On  the  debit  side  write  the  name  of  the  house 
charged  and  the  amount  of  the  charge  on  the  first  line,  and  the  address  and  terms  of  sale 
on  the  second  line.  (See  illustration  on  page  158.)  When  payment  is  received,  write 
the  amount  received  on  the  credit  side  on  the  same  line  with  the  amount  of  the  charge 
which  it  settles.  Enter  the  discount  on  the  credit  side  on  the  next  line,  directly  opposite 
the  address  which  is  on  the  debit  side.  "Sundry  Debtors"  is  not  an  account,  but  a  ledger 
heading  under  which  a  number  of  small  accounts  are  kept. 

0.  0.  D.  C.  0.  D.  items  are  handled  in  the  same  way  as  the  Sundry  Debtors  items. 
All  C.  0.  D.  sales  are  entered  under  this  head,  and  each  sale  is  allowed  two  lines. 

Great  Western  Factory.  This  factory  is  owned  and  operated  by  the  M.  D.  Wells 
Co.,  which  conducts  the  business  represented  in  the  following  transactions.  The  factory 
bills  its  product  to  the  House,  however,  just  as  any  other  factory  would,  and  its  account 
is  kept  in  the  same  way  as  any  other  personal  account  with  a  creditor.  Its  bills  are 
always  net,  and  settlements  with  the  factory  are  made  periodically,  whereas  bills  against 
us  by  other  factories  are  usually  settled  separately  as  they  mature. 

Personal  accounts  are  kept  with  all  creditors,  and  all  purchases  are  carried  through 
the  ledger  whether  they  are  for  cash  or  not. 

Personal  accounts  are  kept  with  all  regular  customers,  and  all  sales  to  them  are 
carried  through  the  ledger  whether  they  are  for  cash  or  not. 


154 


BOOT   AND    SHOE    BUSINESS 


All  sales  for  cash  that  are  not  made  to  regular  customers  who  have  accounts  on  out 
books  are  entered  as  Petty  Cash  Sales.  No  account  is  kept  in  the  ledger  with  Petty  Cash 
Sales,  as  the  footing  of  the  Petty  Cash  Sales  column  in  the  cash  book  is  entered  in  the 
sales  book. 

Dating  Bills  Ahead.  This  is  a  common  custom  in  the  boot  and  shoe  business,  as 
well  as  in  many  other  lines.  The  buyer  must  place  his  orders  many  months  before  the 
season  opens,  both  in  the  spring  and  in  the  fall.  The  shipper  cannot  hold  all  orders  until 
March  1  or  August  1,  as  the  case  may  be,  and  ship  all  out  the  same  day.  He  prefers  to 
fill  the  orders  and  ship  them  at  times  which  suit  his  convenience.  The  buyer  has  no 
objection  to  this,  provided  he  does  not  have  to  pay  the  bill  at  an  early  date.  Hence  the 
custom  has  arisen  of  shipping  early  and  dating  ahead.  The  seller  is  usually  willing  to 
allow  the  buyer  to  discount  such  a  bill,  allowing  him  a  certain  per  cent  or  fraction  of  one 
percent  for  every  month  of  anticipation. 

TRANSACTIONS   FOR  JUNE 

This  set  is  on  the  individual  business  practice  plan  with  which  you  are  familiar.  All  cash  received 
will  be  deposited  daily,  and  all  payments  will  be  made  by  check.  Use  the  same  filing  device  you  used 
in  Part  I.  No  instructions  for  filing  will  be  given,  as  you  should  know  how  to  attend  to  this  without 
assistance  by  this  time.  Specific  instructions  for  bookkeeping  will  be  given  only  for  transactions  that 
present  some  new  features. 

JUNE  1.  19—. 

The  ledger  of  the  M.  D.  Wells  Co.,  located  at  the  corner  of  5th  Ave.  and  Monroe  St., 
Chicago,  111.,  was  closed  at  the  end  of  May,  and  the  balances  brought  down,  all  dated 
June    1,  are    as  shown  by  the  following  trial  balance. 

Balance  of  Balances,  June  1,  19 — . 


1 

Investment  (the  capital  account) 

74747 

20 

1 

Real  Estate  (Inventory) 

35560 

1 

Furniture  &  Fixtures  (Inventory) 

5850 

2 

Horses  &  Wagons  (Inventory) 

875 

2 

Mdse 

29703 

45 

3 

Interest  &  Discount  (Inventories) 

5 

1 

15 

5 

Notes  Receivable 

1250 

5 

Wm.  Anderson,  307  W.  69th  St.  ' 

346 

75 

6 

Fargo,  Keith  &  Co.,  147  5th  Ave. 

250 

8 

E.  E.  Merville,  Cleveland,  0. 

79 

65 

8 

S.  H.  East,  Indianapolis,  Ind. 

126 

70 

10 

Notes  Pay. 

345 

60 

10 

Guthmann,  Carpenter  &  Telling,  222  Franklin  St. 

782 

25 

10 

H.  F.  C.  Dovenmuehle  &  Son,  248  Monroe  St. 

1146 

78 

11 

Bradley  &  Metcalf  Co.,  Milwaukee,  Wis. 

576 

83 

13 

Great  Western  Factory,  Fond  du  Lac,  Wis. 
Cash 

1124 
4140 

89 
50 

1712 

13 

79311 

94 

79311 

94 

According  to  instructions,  your  ledger  headings  have  all  been  written.  Enter  in 
the  ledger  the  items  shown  in  the  above  trial  balance,  with  the  explanation  "Inventory" 
or  "Balance"  in  each  case.  Write  the  cash  balance  in  the  General  column  on  the  debit 
side  of  your  cash  book.     See  the  illustration  of  the  cash  book,  pages  142  and  143. 


TRANSACTIONS    FOR   JUNE  155 

The  cash  is  all  in  the  bank.  Enter  the  amount,  $4140.50,  on  the  stub  of  your  check  book,  and  have 
it  entered  as  a  balance  in  your  pass  book.     (Use  your  old  pass  book.) 

If  your  school  has  a  bank,  your  banking  business  should  be  conducted  through  it.  Inasmuch  as 
the  bank  will  have  accounts  with  a  number  of  students,  your  account  can  be  kept  on  its  books  as  "  (Your 
Name)  for  M.  D.  Wells  Co."* 

The  notes  receivable  are  Incoming  Paper  No.  70  and  Incoming  Paper  No.  71.  Enter  them  as  Notes 
Receivable  No.  1  and  2. 

Notes  Payable  No.  1  is  our  30-day  note  in  favor  of  Pingree  &  Co.  It  is  for  $345.60  and  is  dated  May 
12.     It  bears  6%  interest.     Enter  these  facts  in  your  Notes  Payable  Book. 

Compute  the  interest  secured  on  notes  receivable  and  payable.  Are  the  interest  inventories  correct 
as  shown  in  the  trial  balance  of  June  1  ? 

Now  take  a  trial  balance  from  your  own  ledger  to  make  sure  that  you  have  made  no 
mistakes  in  entering  the  balances  and  inventories. 

You  are  now  ready  to  proceed  with  the  transactions  of  June  1. 

JUNE  1 

Pay  the  taxes  on  our  real  estate,  b}'  check  No.  1  for  $35.00.  The  check  should  be 
drawn  in  favor  of  John  P.  Thompson,  Cook  County  Collector.  The  receipt  for  this  is 
Incoming  Paper  No.  72. 

Note  that  the  receipt  shows  that  a  valuation  of  $35000.00  was  placed  upon  our  property  by  the  assessor. 
The  property  was  taxed  one-half  of  1%,  based  upon  a  one-fifth  valuation.  Verify  the  correctness  of  the 
amount  of  the  tax,  on  this  basis. 

Make  the  bookkeeping  entry  on  the  credit  side  of  the  cash  book,  in  the  Expense  column,  and  place 
a  check  mark  in  the  folio  column,  as  shown  in  the  illustration  of  the  cash  book,  on  pages  142  and  143. 

Deliver  the  check  to  the  County  Collector  by  placing  it  in  the  outgoing  papers  section  of  the  file.  In 
the  future  please  bear  in  mind  that  outgoing  mail  is  always  to  be  placed  in  this  section  of  the  file.  Attend 
to  this  and  other  filing  in  future  without  special  instructions.     Use  your  old  file. 

Receive  an  invoice  (Incoming  Paper  No.  73)  and  pay  it  at  once  by  check.  Two  book- 
keeping entries  are  required.  The  entry  in  the  journal  is  made  first;  then  the  cash  book 
entry.     You  will  find  the  cash  book  entry  illustrated  in  the  model  on  page  143. 

"Wos."  is  the  abbreviation  commonly  used  in  the  boot  and  shoe  business  for  "Women's." 

In  making  the  journal  entry,  it  is  not  necessary  to  itemize  the  goods  bought,  because  the  items  are 
shown  in  detail  on  the  invoice,  which  you  keep  in  your  files.  In  your  explanation  it  is  only  necessary 
to  refer  to  this  invoice,  giving  its  date.  (Sometimes  invoices  are  numbered  as  they  are  received,  and  are 
referred  to  by  number.) 

Read  the  terms  carefully.  Note  that  we  are  allowed  to  deduct  interest  on  $126.00  for  30  days  at 
8%  per  annum  if  we  pay  the  bill  today.  This  is  not,  strictly  speaking,  a  cash  discount,  but  for  purposes 
of  bookkeeping  it  is  entered  in  the  cash  discount  account.  The  matter  is  fully  discusesd  in  the  note  at 
the  bottom  of  page  144. 

Note  that  the  invoice  is  already  receipted.  It  is  assumed  that  this  is  done  at  the  time  the  amount 
is  paid  by  you. 

JUNE  2 

Sell  to  Wm.  Anderson,  307  W.  69th  St.,  City,  on  account,  terms  1/10  n/30: 

1870     7  pairs  Men's  Box  Calf  Bluchers  at        $2.65 

442     7     "      Men's  University  Patent  Bluchers  "  2.95 

675     6     "      Youth's  Patent  Leather  Bluchers  "2.40 

*  The  teacher  will  have  to  make  good  to  the  bank  the  amount  of  this  balance,  either  by  check  or  by 
a  cash  deposit. 


Blu. 

= Bluchers 

0.  G. 

Pat. 

=  Patent 

Bals. 

Lea. 

= Leather 

Kang. 

Ox. 

=  Oxfords 

Vel. 

Butt. 

= Button 

Gr. 

156  BOOT    AND    SHOE    BUSINESS 

Make  out  an  invoice.  Give  the  invoice  our  number  1.  Fill  in  the  date,  name  and  address,  and  terms, 
in  the  spaces  provided.  Do  not  fill  in  the  space  opposite  the  words  "Shipped  Via,"  because  the  goods 
are  not  shipped  out  of  the  city.  In  filling  in  the  items  do  not  use  the  words  "Stock  No.,"  "Pairs,"  etc., 
because  these  words  are  already  printed  at  the  heads  of  the  columns.  The  following  abbreviations  should 
be  used  in  billing: 

=Oil  Grain  Pol.  =  Polish 

= Balmorals  Russ.  =  Russet 

=  Kangaroo  Wos.  =  Women's 

=Velour  Dong.  =Dongola 

=  Grain  Cong.  ==  Congress 

Hereafter  make  out  invoices  for  all  sales  to  persons  having  accounts  with  us  without  being  reminded. 
Your  attention  will  not  be  called  to  this  again. 

"Terms  1/10  n/30"  (1%  10  days,  net  30  days)  means  that  the  bill  was  sold  on  thirty  days'  credit, 
but  that  the  customer  can  secure  a  1%  cash  discount  if  he  will  pay  within  ten  days.  These  are  our  "Reg- 
ular" terms  of  sale  for  everything  except  rubber  goods,  and  hereafter  the  expression  "Terms  Regular" 
will  be  used  to  indicate  "terms  1/10  n/30." 

Be  sure  to  get  the  stock  numbers  right  when  you  make  the  entry  in  the  sales  book,  as  the  description 
is  not  complete  without  it.  The  description  always  tells  whether  the  article  described  is  for  men,  women, 
youths,  boys,  girls,  children,  or  infants.  It  usually  tells  the  quality  of  the  leather,  as  "Calf,"  "Patent 
leather,"  "Vici  Kid,"  "Velour,"  etc.,  and  the  shape  or  style  of  the  shoe,  as  "Blucher,"  "Congress,"  etc. 
Besides  this  it  often  uses  a  name  indicating  the  brand,  such  as  "Mastiff,"  "University,"  "Anchor  Brand," 
etc.  Yet  with  all  this  the  description  is  incomplete  without  a  stock  number.  There  might  be  a  dozen 
different  shoes  which  could  be  described  as  "Men's  University  Patent  Leather  Bluchers,"  but  the  descrip- 
tion "Stock  No.  442"  would  show  definitely  which  one  of  them  was  meant. 

JUNE  3 

Receive  an  invoice  (Incoming  Paper  No.  74). 

The  terms  on  which  the  goods  were  purchased  are  printed  on  the  invoice.  Be  sure  to  make  a  note 
of  them  in  your  journal  entry. 

Pay  Bradley  &  Metcalf  $553.76  by  check.  This  is  for  goods  purchased  May  25  amount- 
ing to  $576.83,  on  the  terms  4/10  n/30. 

Bradley  &  Metcalf's  account  in  the  ledger  stands  credited  with  this  amount.  It  is  necessary  to  make 
the  remittance  today  so  that  it  will  reach  them  on  June  4,  in  time  to  entitle  us  to  the  discount. 

Enter  the  net  amount  of  the  payment  in  the  General  Column  of  the  cash  book,  credit  side,  and  the 
amount  of  the  discount  in  the  Cash  Discount  Cr.  column. 

JTJNE  4 

Sell  to  O'Connor  &  Goldberg,  144  Clark  St.,  the  following  goods,  terms  Regular: 

761     18  pairs  Men's  Oil  Grain  Seamless  Balmorals  at        $1.50 

1330     18     "      Little  Gents' Kid  Blucher  "Mastiff"  "  1.35 

2408     12     "      Wos.  Tan  Vici  Bluchers  "  2.25 

Sell  for  cash  to  a  dealer  who  has  no  account  with  us,  14  pairs  No.  427  Men's  Russet 
Grain  Bluchers  at  $2.50  net. 

Make  the  entry  in  the  petty  cash  sales  column  of  the  cash  book. 

It  will  not  be  necessary  either  to  make  out  an  invoice  or  to  give  a  receipt,  as  the  customer  has  not 
asked  for  either. 

Take  the  proper  amount  of  currency  from  the  currency  envelope.  Enter  the  amount  in  the  Petty 
Cash  Sales  column  in  the  cash  book.  Deposit  the  currency,  and  in  future  deposit  all  currency  and  checks 
received  on  the  same  day  they  are  received.     You  will  not  be  reminded  of  this  again. 


TRANSACTIONS   FOR   JUNE  157 

JUNE  5 

Receive  a  check  from  E.  E.  Merville  on  account  (Incoming  Paper  No.  75).  This  check 
is  to  cover  an  invoice  amounting  to  $79.65  which  we  sold  to  him  on  May  26  on  our  regular 
terms.  He  drew  his  check  for  $79.00,  which  was  15^  more  than  the  net  amount  due  us, 
so  that  we  would  not  lose  the  amount  of  the  bank's  fee  for  exchange. 

When  a  bank  cashes  an  out-of-town  check,  it  charges  a  fee  for  the  service,  except  when  the  check 
is  drawn  upon  a  bank  with  which  it  has  an  agreement  that  each  will  cash  free  of  charge  checks  drawn 
upon  the  other.  This  fee  is  called  exchange.  Anyone  sending  to  another  city  a  check  drawn  upon  a  local 
bank,  should  make  his  check  lai^e  enough  to  cover  exchange,  unless  he  knows  that  no  exchange  will  be 
charged. 

Credit  E.  E.  Merville  for  the  amount  of  his  remittance  (less  15^)  in  the  General  column  on  the  debit 
side  of  the  cash  book.  Write  the  amount  of  the  discount  on  the  same  line.  On  the  next  line,  enter  the 
amount  sent  to  cover  the  exchange  (15<i)  in  the  General  column,  crediting  Expense. 

Mr.  Merville  did  not  ask  for  a  receipt,  so  it  will  not  be  necessary  to  send  him  one,  as  his  check  will 
be  canceled  and  returned  to  him  in  the  course  of  time  and  our  endorsement  upon  it  will  constitute  a  satis- 
factory receipt. 

When  we  deposit  E.  E.  Merville's  check,  the  bank  charges  us  15^  exchange. 

Enter  the  15^  in  the  Expense  column  of  the  cash  book.  Note  that  this,  being  a  debit  to  Expense, 
is  canceled  by  the  credit  to  Expense  in  the  last  entry,  so  that  we  have  not  lost. 

When  you  take  your  deposit  to  the  bank,  the  bank  clerk  will  subtract  \5i,  the  charge  for  exchange,  from 
the  amount  of  the  total  deposit  as  you  have  entered  it  on  the  deposit  slip.  He  will  enter  the  net  amount 
of  your  deposit  only,  in  the  pass  book.  This  net  amount,  $78.85,  is  the  amount  you  should  enter  on  your 
check  book  stub. 

Some  depositors  prefer  to  pay  exchange  charges  in  cash.  WTien  this  is  done,  the  plan  of  depositing 
all  cash  receipts  being  followed,  the  cash  receipts  for  a  given  period  are  in  exact  agreement  with  the  total 
shown  by  the  pass  book  to  have  been  deposited  during  that  period. 

JUNE  6 

Sell  to  Fargo,  Keith  &  Co.,  147  Fifth  Ave.,  terms  Regular,  August  1  dating,  the  follow- 
ing goods: 

1900     18  pairs  Men's  Gun  Metal  Bluchers  at        J2.85 

1171     15     "      Men's  Vici  Balmorals,  Old  Man's  Last        "  2.00 

268     12     "      Men's  High  Cut  Work  Shoes  "  5.80 

637     15     "      Youth's  Kangaroo  Grain  "High  Cut"         "  1.85 

"Aug.  1  dating."     See  Dating  Bills  ahead,  page  146.     Make  a  note  of  the  dating  on  the  first  line  of 

your  sales  book  entry,  between  the  address  and  the  terms.     The  first  line  of  your  sales  book  entry  will 

read,  "Fargo,  Keith  &  Co.,  147  Fifth  Ave.,  Aug.  1  dating,  Reg." 

Pay  the  salaries  of  the  bookkeeper,  $20.00;  and  the  stenographer,  $16.50. 

Draw  a  check  to  "currency"  for  the  amount  of  both  salaries.  In  accordance  with  your  instructions 
to  make  all  payments  by  check,  you  will  remember  to  make  out  a  check  for  every  disbursement.  Your 
attention  will  not  be  called  to  this  again. 

Enter  this  in  the  Expense  column  of  the  cash  book,  checking  in  the  folio  column.     Use  one  line  only. 

Petty  cash  sale  made  today,  $23.65.  Detach  Incoming  Paper  No.  76  from  the  pad 
of  incoming  papers. 

JUNE  8 

Sell  to  S.  H.  East,  Indianapolis,  Ind.,  terms  Regular,  an  invoice  of  shoes  as  follows: 

1855     30  pairs  Men's  Kid  "Go  Easy"  Bluchers  at  $3.15 

1805    24     "      Men's  Kid  Balmorals  "  2.50 

478     12     «     Men's  University  Velour  Calf  Bluchers  "  2.95 

36     "      Men's  Para  Rubbers  "Acton"  "  .** 


158 


BOOT    AND    SHOE    BUSINESS 


Ask  your  teacher  to  assign  to  you  one  of  the  following  price  lists,  and  in  this  and  all 
future  sales  use  the  prices  in  the  list  assigned  you,  on  the  articles  named  in  the  list: 

Variable  Price  Lists 


List  1 

List  2 

List  3 

List  4 

List  5 

List  6 

List  7 

List  8 

List  9 

Men's  Para  Rubbers  "Acton" 

Women's  Rubbers  "Zephyr  Croquet". 
Men's  American  Rubbers  "Puritan".  . 
Boys'  Para  Rubbers  "Heavy  Over". . . 
Wos.  American  Rubbers  "Sensible". .  . 
Men's  Rubbers  "Everstick"  

.75 
.60 
.90 
.65 
.68 
.85 
1.40 

.80 
.65 
.95 
.70 
.69 
.86 
1.42i 

.85 
.70 

1.00 
.65 
.67 
.85 

1.45 

.80 
.65 
.90 
.70 
.66 
.86 
1.42i 

.75 
.65 
.95 
.75 
.65 
.85 
1.40 

.£0 
.GO 

1.00 
.65 
.64 
.86 

1.45 

.75 
.GO 
.95 
.70 
.65 
.90 
1.42^ 

.80 
.65 
.95 
.65 
.64 
.85 
1.40 

.75 
.70 
1.00 
.75 
.65 
.86 

Boys'  Gum  Lumbermen's  Overs 

1.42i 

Men's  Para  Rubbers  "Acton" 

Women's  Rubbers  "Zephyr  Croquet" 
Men's  American  Rubbers  "Puritan".. 
Boys'  Para  Rubbers  "Heavy  Over". . 
Wos.  American  Rubbers  "Sensible".. 

Men's  Rubbers  "Everstick" 

Boys'  Gum  Lumbermen's  Overs 


List  10 

List  11 

List  12 

List  13 

List  14 

List  15 

List  16 

List  17 

.80 

.85 

.90 

.85 

.80 

.75 

.75 

.80 

.60 

.60 

.65 

.70 

.60 

.65 

.70 

.70 

.90 

.95 

1.00 

.90 

.95 

1.00 

1.00 

.90 

.60 

.70 

.60 

.60 

.70 

.60 

.60 

.65 

.66 

.67 

.68 

.69 

.70 

.65 

.64 

.65 

.85 

.86 

.85 

.86 

.85 

.86 

.87 

.88 

1.45 

1.40 

1.37i 

1.40 

1.42  J 

1.45 

1.40 

1.42i 

List  18 

.75 
.60 
.90 
.70 
.66 
.89 
1.45 


Men's  Para  Rubbers  "Acton" 

Women's  Rubbers  "Zephyr  Croquet" 
Men's  American  Rubbers  "Puritan". , 
Boys'  Para  Rubbers  "Heavy  Over".  . 
Wos.  American  Rubbers  "Sensible".. 

Men's  Rubbers  "Everstick". . .    

Boys'  Gum  Lumbermen's  Overs 


List  19 

List  20 

List  21 

List  22 

List  23 

List  24 

List  25 

.80 

.85 

.80 

.75 

.80 

.85 

.75 

.60 

.65 

.70 

.75 

.60 

.65 

.70 

.95 

1.00 

.90 

.90 

.95 

.95 

1.00 

.65 

.60 

.70 

.70 

.65 

.65 

.70 

.67 

.68 

.69 

.70 

.65 

.66 

.67 

.90 

.65 

.66 

.67 

.68 

.69 

.70 

1.45 

1.40 

1.42  J 

1.45 

1.45 

1.42i 

1.40 

List  26 


.80 
.60 
.90 
.60 
.68 
.65 
1.45 


Shipping. — The  shipment  is  made  via  the  Baltimore  &  Ohio  Railroad.  Fill  out  a 
"straight"  bill  of  lading,  in  triplicate,  giving  it  the  shippers'  number  L  Describe  the 
Mdse.  as  "2  boxes  shoes."  You  are  already  familiar  with  the  details  of  filling  out  a  bill 
of  lading.  The  agent,  C.  L.  Grafton,  returns  the  "original"  and  "memorandum"  to  you 
with  the  agent's  number  17649,  the  weight  entered  as  160  pounds,  and  his  signature  as 
agent.     Send  the  "memorandum"  to  the  customer,  retaining  the  "original." 

JUNE  10 

Receive  a  note  signed  by  S.  H.  East  (Incoming  Paper  No.  77).  This  note  is  to  cover 
an  invoice  of  Mdse.  sold  him  on  May  15,  and  bears  the  date  of  the  invoice. 

Pay  the  Chicago  Record-Herald  for  advertising  during  May.  Their  receipted  bill  is 
Incoming  Paper  No.  78. 

H.  F.  C.  Dovenmuehle  &  Son's  account  shows  a  balance  of  $1146.78  in  their  favor. 
This  consists  of  two  items:  One  an  invoice  amounting  to  $500.00  net,  due  June  2;  the 
other  an  invoice  amounting  to  $646.78  net,  due  June  20.  Pay  both  bills  today.  The 
first  invoice  draws  interest  at  6%  from  the  due  date  until  the  date  of  payment.  On  the 
second,  we  are  entitled  to  discount  at  6%  from  June  10  to  June  20, 


TRANSACTIONS    FOR   JUNE  159 

The  discount  item  is  larger  than  the  interest  item.  The  net  result  of  the  two  items  is  therefore  a 
saving  to  us.  Enter  it  in  the  Cash  Discount  Cr.  column  in  the  cash  book.  Strictly  speaking,  this  is  not 
a  Cash  Discount  item,  but  an  Interest  and  Discount  item,  because  it  is  a  payment  of  money  in  advance 
of  the  average  due  date  of  the  biUs,  and  the  amount  of  the  discount  is  determined  by  the  number  of  days 
of  prepayment  at  an  annual  rate  of  discount,  whereas  a  cash  discount,  strictly  speaking,  is  a  lump  siun 
deducted  as  a  consideration  for  payment  within  a  given  number  of  days  after  the  goods  have  been  billed. 
The  plan  of  handling  the  cash  discount  account  in  this  set  has  already  been  fully  explained  on  page  144, 
however,  and  in  accordance  with  that  plan  you  will  credit  Cash  Discount. 

JUNE  11 

Draw  at  sight  on  Wm.  Anderson  for  $346.75  due  today  and  draw  at  two  days'  sight 
on  Fargo,  Keith  &  Co.  for  $250.00  due  on  June  13.  Both  drafts  are  to  be  drawn  in  favor 
of  Guthmann,  Carpenter  &  Telling,  to  be  appUed  on  their  bill  of  $782.25  against  us  due 
June  13  without  discount.  Remit  the  drafts  to  Guthmann,  Carpenter  &  Telling  for  credit, 
with  our  check  for  the  balance  of  the  $782.25. 

This  requires  an  entry  in  the  cash  book  and  a  full  explanation  in  the  journal.  Make  no  entry  in  the 
journal  until  Guthmann,  Carpenter  &  Telling  report  that  the  drafts  have  been  honored. 

As  has  been  previously  explained,  some  bookkeepers  would  make  the  entry  for  these  drafts  at  once, 
risking  the  possible  necessity  of  a  correction  entry  in  preference  to  the  certain  trouble  of  keeping  track 
of  a  memorandum  entry. 

Sell  Streeter  Bros.,  187  State  St.,  terms  Regular,  the  following  bill: 

754  36  pairs  Men's  Kangaroo  Grain  "Kant  Rip"  at        $1.75 

1311  30     "      Boys' Box  Calf  Blucher  "Mastiff"  "1.75 

2806  18     "      Misses' Kid  Blucher,  patent  tip  "  1.42* 

4005  24     "      Infants' Velour  Polish,  patent  tip  "  1.20 

Pay  by  check  our  note  in  favor  of  Pingree  &  Co.  due  today  with  interest  at  6%.  The 
canceled  note  is  Incoming  Paper  No.  79. 

Make  two  entries  in  the  general  column  of  the  cash  book,  one  for  the  note  and  one  for  interest. 
We  hold  a  note  against  Streeter  Bros,  due  July  1.     Discount  it  at  the  bank  at  5%. 

The  interest  from  the  date  of  the  note  until  the  date  of  its  maturity  must  be  added  to  the  face  of  the 
note,  and  the  discount  figured  on  the  full  amount.     The  discount  is  figured  from  June  11  to  July  1. 

You  will  find  the  total  amovmt  allowed  by  the  bank  to  be  greater  than  the  face  of  the  note.  The 
difference  is  credited  to  Interest  and  Discount.  Make  two  entries  in  the  General  column  on  the  debit 
side  of  the  cash  book,  and  add  the  full  amount  allowed  by  the  bank  to  the  balance  of  your  check  book  stub. 
Remember  that  the  note  must  be  endorsed. 

JUNE  12 

Sell  to  Frazin  &  Oppenheim,  266  State  St.,  July  2  dating,  terms  Regular,  the  follow- 
ing bill: 

247  48  pairs  Men's  Russet  Grain  Bluchers  at  $2 .  50 

637  36     "      Youth's  Kang.  Grain  "High  Cut"  "  1.85 

2408  24     "      Wos.  Tan  Vici  Bluchers  "  2.25 

4005  18     "      Infants'  Velour  PoUsh,  patent  tip  "  .90 

"July  2  dating,"  This  means  that  the  terms  1/10  n/30  begin  to  be  effective  on  July  2, 
just  as  if  the  bill  were  dated  July  2.  In  making  out  the  invoice,  date  it  June  12  as  you 
would  in  any  case;  but  opposite  the  word  "Terms"  write:  "July  2  dating.  Regular." 
Read  Dating  Bills  Ahead,  page  146. 


160  BOOT    AND    SHOE    BUSINESS 

Frazin  &  Oppenheim  pay  spot  cash  for  this  order.  This  entitles  them  to  1%  cash 
discount.  In  addition  to  this,  allow  them  an  extra  i%  for  one  month's  anticipation  of 
the  cash  payment.     Their  check  is  Incoming  Paper  No.  80. 

Read  again  the  explanation  of  this  matter  given  at  the  top  of  page  145.  If  the  check  is  drawn  for 
the  correct  amount,  make  the  entry.     Write  a  receipt  upon  the  bill. 

Receive  an  invoice  from  the  Chicago  Rubber  Co.  (Incoming  Paper  No.  81).  Make 
careful  note  of  the  dating  and  terms. 

Receive  a  check  from  Wm.  Anderson  (Incoming . Paper  No.  82).  This  is  to  cover 
our  invoice  of  June  2,  less  our  regular  discount.     Be  sure  the  amount  of  the  check  is  correct. 

Take  the  invoice  from  the  outgoing  papers  section  of  the  file,  receipt  it  and  return  it  to  the  same  sec- 
tion. Remember  in  future  to  do  this  whenever  you  receive  payment  for  an  invoice.  Your  attention 
will  not  be  called  to  this  again. 

Guthmann,  Carpenter  &  Telling  report  that  both  drafts  sent  them  June  11  have  been 
honored,  the  sight  draft  having  been  paid  and  the  2-day  draft  having  been  accepted. 
Now  make  the  entries  in  the  Journal.     Consult  Rules  for  Journalizing  Drafts,  page  136. 

JUNE  13 

Streeter  Bros,  telephone  us  today  offering  to  duplicate  their  order  of  June  11,  if  we 
will  give  them  the  terms  1/30  n/60  on  today's  order.     To  this  we  agree. 

This  means  that  they  want  us  to  send  out  to  them  another  order  exactly  like  their  order  of  June  11 
as  to  kinds,  quantities,  and  prices.  Do  not  wait  for  a  letter  from  them  confirming  the  telephone  message, 
but  fill  the  order  at  once.  If  they  had  wished  us  to  wait  for  their  letter  they  would  not  have  taken  the 
trouble  to  telephone  the  order  in. 

H.  F.  C.  Dovenmuehle  &  Son's  invoice  of  June  3  falls  due  today.  Pay  it  by  check 
after  deducting  the  discount  to  which  we  are  entitled  by  its  terms. 

Whenever  you  make  payment  for  an  invoice,  see  that  it  is  receipted  by  the  proper  parties  and  returned 
to  you.  Then  file  it  with  the  receipts.  Do  this  in  every  case  except  when  you  pay  spot  cash  for  an  invoice 
and  it  comes  to  you  already  receipted. 

Pay  the  salaries  for  the  week  as  on  June  6. 


JUNE  16 

Receive  an  invoice  from  the  Bradley  &  Metcalf  Co.,  Milwaukee,  Wis.  (Incoming  Paper 
No.  83).     Note  the  dating  and  terms. 

The  freight  on  this  shipment  amounts  to  85^,  which  we  pay  to  the  Goodrich  Trans- 
portation Co.,  plus  50^  dray  age  charges. 

Charge  $1.35  to  the  freight  account.     Drayage  is  classed  with  freight  in  such  a  case  as  this. 
The  student  by  this  time  is  familiar  with  the  forms  of  freight  notices  and  expense  bills,  and  these  papers 
will  be  omitted  from  the  pad  of  incoming  papers. 

Sell  to  DeMuth  &*  Co.,  237  State  St.,  terms  Regular: 

1870     24  pairs  Men's  Box  Calf  Bluchers  at       $2.65 

1900     30     "      Men's  Gun  Metal  Bluchers  "  2.75 

1855     18     «      Men's  "Go-Easy"  Bluchers  "3.15 


TRANSACTIONS    FOR   JUNE  161 

Sell  to  H.  E.  Montgomery,  Hartford,  Conn.,  the  following  bill  of  rubber  goods,  terms 
2/10  n/60,  F.  O.  B.  Chicago: 

24  pairs  Men's  Para  Rubbers  "Acton"  at  .** 

18     "      Women's  Am.  Rubbers  "Zephyr  Croquet""  .** 

12     "      Boys' Para  Rubbers  "Heavy  Over"  "  .** 

(Consult  page  150  for  prices.) 

Ship  the  above  bill  via  the  B.  &  0.  R.  R.,  prepaying  the  charges,  $2.30. 

Since  this  invoice  is  sold  "F.  O.  B.  Chicago,"  the  freight  expense  must  be  borne  by  the  purchaser. 
In  this  instance,  we  prepay  the  charges  because  Mr.  Montgomery  has  requested  that  we  do  so,  charging 
the  amount  so  advanced,  to  his  account.*  Make  a  memorandum  of  this  beneath  the  sales  book  entry, 
writing  nothing  in  the  money  columns.  If  Mr.  Montgomery  should  at  any  time  request  a  duplicate  of  this 
bill,  the  presence  of  the  memorandum  in  the  sales  book  would  safeguard  us  against  the  omission  of  this 
item.     Add  the  amount  of  the  freight  to  the  total  of  the  invoice. 

Fill  out  a  "straight"  bill  of  lading  in  triplicate,  giving  it  the  shipper's  number  2.  Describe  the  goods 
as  "1  box  shoes."  Write  the  words  "To  be  prepaid"  in  the  space  provided.  The  agent,  C.  L.  Grafton, 
will  then  give  the  bill  the  agent's  number  18216,  fill  in  the  weight,  65  pounds,  and  collect  $2.30  from  you, 
receipting  for  it  in  the  space  provided  for  that  purpose.  He  will  then  sign  and  return  to  you  the  "original" 
and  "memorandum."     You  will  forward  the  memorandum  to  the  customer,  retaining  the  original. 

It  is  not  likely  that  the  railroad  will  permit  its  agent  to  accept  a  check  except  upon  his  own  responsi- 
bility, so  you  should  draw  your  check  to  "currency"  and  cash  it,  giving  the  cash  to  the  agent.  Charge 
the  $2.30  toH.  E.  Montgomery  through  the  cash  book. 

Responsible  firms  may  make  special  arrangements  whereby  their  prepaid  freight  is  handled  promptly, 
no  delay  being  occasioned  by  waiting  for  the  charges  to  be  ascertained  and  actually  paid  before  the  goods 
are  started.  Payment  for  such  an  item  is  supposed  to  be  made  by  the  shipper  immediately  upon  receipt 
of  notification  of  the  amount  of  the  charge.  This  notification  may  be  by  mail,  or  a  collector  may  call 
with  the  expense  bill. 

Receive  a  bill  from  the  Sleepeck-Helman  Printing  Co.,  and  pay  it  by  check.    Their 
bill  is  Incoming  Paper  No.  84;  note  that  it  is  already  receipted. 
Buy  2000  l^i  and  250  20  stamps. 

The  20  stamps  are  for  regular  office  use.  The  10  stamps  are  to  be  used  in  mailing  circulars.  You 
will  therefore  charge  a  part  of  the  $25.00  to  Expense  and  a  part  to  Advertising. 

The  Post  Office  will  not  accept  your  check.     Draw  a  check  to  Currency  and  pay  for  the  stamps  in  cash. 

Petty  Cash  Sales  for  the  day  amount  to  $15.75. 

Take  this  amount  from  the  currency  envelope. 

A  check  is  received  from  O'Connor  &  Goldberg  (Incoming  Paper  No.  85).  This  in 
settlement  of  our  invoice  of  June  4,  less  discount. 

If  the  check  is  for  the  right  amount,  make  the  entry.  Note  that  O'Connor  and  Goldberg  have  taken 
the  discount,  though  eleven  days  have  passed  since  June  4.  This  is  permissible  because  the  14th  was 
Sunday. 

At  this  point,  post  your  books  and  take  a  trial  balance.  Do  not  post  the  footings 
of  the  sales  book  or  cash  book,  however.  Make  neat  pencil  footings  in  these  books,  writ- 
ing them  close  to  the  last  item  in  each  column.  Include  in  the  trial  balance  the  total 
of  Mdse.  Sales,  Petty  Cash  Sales,  Expense,  Cash  Discount  Dr.  and  Cr.,  and  the  cash  bal- 

*0n  every  railroad  line  there  are  certain  stations  maintained,  called  "prepay  stations,"  where  there 
are  no  agents.  Freight  will  be  delivered  to  one  of  these  stations,  if  the  charges  have  been  prepaid,  but, 
if  not,  the  freight  will  be  delivered  to  the  nearest  station  where  there  is  an  agent,  who  can  collect.  For 
the  convenience  of  the  customer,  the  shipper  will  prepay  freight  to  one  of  these  "prepay"  points- 
Hartford,  Conn  ,  is,  of  course,  not  a  "prepay"  station;  the  freight  charges  in  the  above  case  were  prepaid 
at  the  customer's  request,  for  reasons  which  he  has  not  stated. 


162  BOOT    AND    SHOE    BUSINESS 

ance.  In  determining  the  cash  balance,  take  into  consideration  the  Petty  Cash  Sales 
column  and  the  Expense  column.  There  are  six  personal  accounts  in  the  ledger  that 
balance.     These  should  be  closed. 

JUNE  16 

Sell  to  WilHs  &  Atwood,  365  63d  St.,  City,  terms  Regular,  on  a  July  1  dating: 
478     6    pairs  Men's  University  Calf  Bluchers  at        $2 .  95 

780  12       "      Wos.  University  Vici  Kid  Bluchers  "2.60 

1363     9       "      Misses' Favorite  Vici  Kid  Bluchers  "1.15 

Receive  an  invoice  from  A.  A.  Putnam  &  Son  (Incoming  Paper  No.  86). 
Receive  a  check  from  Willis  &  Atwood  for  their  note  in  our  favor,  due  today  with 
interest  (Incoming  Paper  No.  87). 

Make  sure  that  the  amount  is  correct  before  making  the  entry     Cancel  and  return  the  note. 

Receive  from  the  A.  H.  Andrews  Co.  an  invoice  for  office  furniture  (Incoming  Paper 
No.  88)  and  pay  it  by  check. 

No  account  is  kept  with  the  A.  H.  Andrews  Co.  Enter  the  transaction  in  the  cash  book,  charging 
Furniture  &  Fixtures.     Note  that  the  invoice  is  already  receipted. 

JUNE  17 

Receive  an  invoice  (Incoming  Paper  No.  89).  Note  the  terms  carefully.  Pay  freight 
and  drayage  on  the  goods  in  cash,  $3.50. 

Get  the  cash  by  drawing  a  check  in  favor  of  "Currency." 

Remit  to  Hamilton,  Brown  &  Co.  at  once  by  check  for  the  goods  received  today. 

We  are  entitled  to  two  percent  cash  discount.  We  are  also  entitled  to  additional  discount  of  i% 
a  month  for  the  two  months'  anticipation.  Attach  the  check  to  the  invoice  and  mail  both  to  Hamilton, 
Brown  &  Co. 

Pay  cash  for  50  bushels  of  corn  at  52^,  for  horse  feed.     This  is  charged  to  Expense. 

If  there  were  many  such  items  as  the  foregoing,  a  special  expense  account  should  be  kept,  under  the 
title  Barn  Expense,  or  Delivery  Expense,  or  City  Delivery  Expense,  or  some  similar  title,  into  which  account 
would  be  entered  all  items  of  current  expense  connected  with  the  making  of  deliveries  by  wagon.  Nat- 
urally this  would  include  such  items  as  barn  rental,  wages  of  drivers,  feed  and  care  of  horses,  repairs  of 
wagons,  etc.  But  it  would  not  include  the  inventory  of  horses  and  wagons,  which  is  a  part  of  the  invest- 
ment, and  not  an  expense  item.  A  Horse  and  Wagon  account  should  be  kept  for  this  inventory,  as  it 
is  kept  in  this  set. 

The  purpose  of  keeping  a  City  Delivery  Expense  account  is  to  show  the  exact  cost  of  this  branch  of 
the  service,  so  that  it  can  be  determined  whether  it  would  be  more  economical  for  the  concern  to  do  its 
own  delivering  or  to  have  it  done  by  some  express  company  or  individual  who  might  have  facilities  for 
attending  to  deliveries  cheaply  and  promptly. 

JUNE  18 

A.  W.  Wilson,  purchasing  agent  for  the  Illinois  State  Reformatory  at  Pontiac,  111., 
leaves  an  order  for  50  pairs  No.  1311  Boys'  Box  Calf  Blucher  "Mastiff"  at  $1.85,  terms 
Regular.     The  freight  charges  are  to  be  paid  by  him. 

Ship  via  the  Chicago  &  Alton  Railroad.  Fill  out  a  "straight"  bill  of  lading  in  triplicate,  shipper's 
number  3.  Describe  the  goods  as  "1  box  shoes."  Proceed  as  in  the  transaction  on  June  15.  H.  H. 
Hill,  the  agent,  inserts  the  agent's  number  as  14125  and  the  weight  as  62  pounds. 

This  institution  buys  shoes  only  once  or  twice  a  year,  and  there  is  no  reason  for  opening  an  account 
with  it.  The  sales  book  entry  is  made  in  the  usual  way,  but  in  posting  enter  the  amount  under  Sundry 
Debtors.     (See  the  explanation  of  Sundry  Debtors  in  the  introduction.) 


TRANSACTIONS    FOR   JUNE  163 

Discount  S.  H.  East's  note  due  July  14,  at  the  bank,  at  5%. 

Add  to  the  face  of  the  note  the  interest  for  the  60  days.  The  discount  is  figured  on  the  full  amount) 
for  the  number  of  days  the  note  has  yet  to  run.  Don't  forget  to  endorse  the  note.  See  the  last  paragraphs 
under  June  11,  for  an  explanation  of  the  procedure  of  discounting  a  note  at  the  bank. 

JTJKE  19 

Receive  an  invoice  (Incoming  Paper  No.  90).  The  freight  charges  were  prepaid  by 
Roberts,  Johnson  &  Rand,  and  they  have  added  the  amount  prepaid  by  them  to  the  face 
of  the  bill. 

Make  two  separate  journal  entries  crediting  Roberts,  Johnson  &  Rand. 

Sell  to  E.  E.  Merville,  Cleveland,  Ohio,  on  our  regular  terms,  F.  O.  B.  Chicago: 

1171     48  pairs  Men's  Vici  Bals.,  Old  Man's  Last  at        $2.00 

2408    24     "      Wos.  Tan  Vici  Bluchers  "  2.25 

2806    24     "      Children's  Kid  Bluchers,  Pat.  tip  "  1.20 

The  expense  for  freight  on  this  shipment  is  to  be  borne  by  E.  E.  Merville,  but  at  his  request  we  prepay 
the  charges  for  him 

Fill  out  a  "straight"  bill  of  lading  in  triplicate,  shipper's  number  4.  Shipment  is  made  via  the  B.  &  O. 
Describe  the  goods  as  "2  boxes  shoes."  Proceed  as  in  previous  similar  transactions.  C.  L.  Grafton, 
the  agent,  inserts  the  agent's  number  as  19120,  and  the  weight  as  138  pounds.  The  charges  amount  to 
$3.75,  which  you  will  pay  in  cash,  drawing  a  check  to  "currency"  as  usual. 

Add  the  amount  of  the  prepaid  charges  to  the  face  of  the  invoice.  Charge  the  amount  to  Mr.  Merville 
through  the  cash  book.  Make  a  memorandum  of  this  in  the  sales  book  beneath  the  charge  entry,  but 
make  no  extension  in  the  money  columns. 

The  invoice  for  which  we  made  remittance  to  Hamilton,  Brown  &  Co.  on  the  17th, 
is  returned  today  receipted. 

In  future  the  student  may  attend  to  the  matter  of  securing  these  receipts,  without  specific  instructions. 
Ship  C.  0.  D.  by  freight  to  L.  C.  McCann,  Reading,  Pa.: 

780     24  pairs  Wos.  University  Vici  Kid  Bluchers  at        $2.95 

2806     18     "      Misses' Kid  Bluchers,  Pat.  tip  "  1.42i 

4005     12     "      Infants' Velour  Pol.  Pat.  tip  "  1,20 

The  first  line  of  the  entry  in  the  sales  book  should  read,  "C.  O.  D.,  L.  C.  McCann, 
Reading,  Pa.,  Reg." 

Mr.  McCann  is  of  course  entitled  to  our  regular  cash  discount  of  1%.  Enter  the  amount  of  the  cash 
discount  ($1.11)  in  the  Cash  Discount  Dr.  column  of  the  cash  book  now,  so  that  when  it  is  posted  the 
C.  O.  D.  account  will  show  only  the  net  amount  which  is  to  be  returned. 

Shipping  C.  O.  D.  requires  the  use  of  the  "Order"  bill  of  lading.  This  is  issued  in  triplicate.  The 
"original"  is  printed  on  yellow  paper.  The  "shipping  order"  and  "memorandum"  are  blue.  This  kind 
of  a  bill  of  lading  is  transferable  by  endorsement.  Read  the  paragraph  relating  to  this  which  is  printed 
in  heavy  black  type  on  each  of  the  three  forms. 

Fill  out  the  three  forms.  As  the  goods  are  to  be  shipped  via  the  Pittsburg,  Ft.  Wayne  &  Chicago 
railroad,  insert  the  name  of  that  company  in  the  space  to  the  left  of  the  words  "Railroad  Company." 
Give  the  bill  of  lading  the  shipper's  number  5.  Insert  the  shipping  point,  the  date,  and  the  name  of 
your  house  as  shipper  in  the  proper  spaces.  In  the  space  opposite  the  words  "Consigned  to  Order  of," 
write  the  name  of  your  own  company.  Destination,  Reading,  Pa.  (Omit  the  name  of  the  county  as 
unnecessary  in  this  case.)  Opposite  the  word  "Notify"  write  "L.  C.  McCann"  and  write  his  address 
on  the  line  below.     Enter  the  number  and  description  as  "  1  box  shoes."     Sign  for  your  firm  as  shipper. 

Upon  your  delivery  of  the  goods  to  the  railroad  company,  the  agent,  H.  C.  Manton,  gives  to  your 
bill  of  lading  a  number  (Agent's  No.  1176),  fills  in  the  weight,  50  lbs.,  signs  for  the  company,  and  returns 
to  you  the  Original  and  Memorandum.     File  the  Memorandum  with  your  receipts.     Endorse  the  Original 


164  BOOT   AND    SHOE   BUSINESS 

to  the  order  of  L.  C.  McCann,  and  mail  it  to  the  First  National  Bank,  Reading,  Pa.,  with  sight  draft 
attached  for  the  amount  due  from  Mr.  McCann.  Accompany  the  draft  and  bill  of  lading  with  a  letter 
to  the  bank  instructing  them  to  collect  the  amount  of  the  draft  plus  collection  and  exchange  and  deliver 
the  endorsed  bill  of  lading  to  Mr.  McCann.  The  words  "With  collection  and  exchange  charges"  should 
be  written  on  the  face  of  the  draft,  preceding  the  signature.  Write  to  Mr.  McCann  advising  him  of  ship- 
ment, and  stating  that  you  have  drawn  upon  him  through  the  First  National  Bank  of  his  city  for  $ , 

the  net  amount  due  on  the  invoice. 

If  you  do  not  instruct  the  bank  to  collect  its  fees  for  collection  (the  work  of  collecting  the  money) 
and  exchange  (the  trouble  of  remitting  the  returns  to  us)  from  Mr.  McCann,  the  face  of  the  draft  only  will 
be  collected  and  the  charges  for  collection  and  exchange  will  be  deducted  from  the  remittance  to  us.  It 
is  only  fair  that  Mr.  McCann  shall  bear  this  expense;  we  should  not  be  expected  to  bear  any  expense  in 
collecting  from  him  and  we  certainly  do  not  propose  to  bear  the  expense  of  having  the  money  sent  to  us — 
if  we  should  follow  such  a  plan  all  customers  would  buy  C.  O.  D.  so  as  to  save  the  exchange  charges  in 
remitting. 

JUNE  20 

Receive  an  invoice  from  H.  F.  C.  Dovenmuehle  &  Son  (Incoming  Paper  No.  91). 
Sell  to  Frazin  &  Oppenheim,  on  our  regular  terms,  July  1  dating: 

1901     24  pairs  Men's  Box  Calf  Bluchers  at  $1.75 

2100     18     "      Wos.  Dongola  Polish  "  1.45 

12     "      Wos.  Rubbers  "Zephyr  Croquet"  "  .** 
(Consult  your  price  list  for  last  item.) 

Pay  the  office  salaries  as  on  previous  Saturdays. 

JUNE  22 

Sell  to  Fargo,  Keith  &  Co.,  net  on  their  30-day  note  without  interest: 

3872     18  pairs  Men's  Blackstone  Bluchers  at        $2.25 

5252     18     "      Men's  Hartford  Bluchers  "  1.85 

1607     12     "      Men's  King  George  Oxfords  "  2.60 

Fill  out  a  note  for  Fargo,  Keith  &  Co.  to  sign.  Your  teacher  or  some  student  he  may  appoint  will 
affix  Fargo,  Keith  &  Co's  signature. 

Pay  the  Chicago  Rubber  Shoe  Co's  bill  of  June  12,  less  the  discount  allowed. 

The  discount  allowed  includes  1%  cash  discount  and  1%  a  month  for  anticipation,  making  a  total 
of  6%,  all  of  which  is  entered  as  cash  discount. 

H.E.Montgomery,  Hartford,  Conn.,  requests  a  duplicate  of  the  invoice  of  goods  shipped 
him  on  the  15th  of  this  month.  Refer  to  your  salesbook  for  the  items.  Do  not  fail  to 
add  to  the  total  of  the  bill  the  amount  of  the  freight  charges  advanced,  as  you  did  when 
you  made  out  the  original  invoice. 

Remit  to  the  Bradley  &  Metcalf  Co.  a  check  in  payment  of  their  invoice  dated  June 
13  less  discount. 

Receive  a  check  from  Streeter  Bros.  (Incoming  Paper  No.  92)  to  cover  our  invoice 
of  June  11  less  1%. 

This  amount  was  due  June  21,  but  as  June  21  was  Sunday,  we  will  allow  the  discount  today,  in  accord- 
ance with  law  and  the  customs  of  business. 

JUNE  28 

Sell  to  Willis  &  Atwood,  on  our  regular  terms: 

754     18  pairs  Men's  Kang.  Grain  "Kant  Rip"  at        $1.75 

780     12     "      Wos.  University  Vici  Kid  Bluchers  "  2 .  50 

1716     12     "      Children's  A.  B.  C.  Vici  Pat.  tip  Blu.  "  .75 


.  TRANSACTIONS    FOR   JUNE  165 

The  First  National  Bank  of  Reading,  Pa.,  reports  collection  of  our  draft  against  L.  C. 
McCann,  which  we  drew  on  June  19  to  cover  the  amount  due  on  Mr.  McCann's  C.  O.  D. 
order.  They  have  collected  their  fee  from  Mr.  McCann,  so  we  have  no  collection  charges 
to  pay.  Their  Chicago  bank  draft  for  the  amount  is  Incoming  Paper  No.  93.  Deposit 
it  the  same  as  a  check.     Credit  the  C.  0.  D.  account. 

Receive  an  invoice  from  Pingree  &  Co.,  Detroit,  Mich.  (Incoming  Paper  No.  94). 

Pay  the  freight  charges  in  cash,  $2.75,  following  the  same  procedure  as  formerly. 

Sell  to  H.  C.  Carriel,  buyer  for  the  Illinois  State  Hospital  for  the  Insane  at  Jackson- 
ville, 111.,  on  our  regular  terms,  the  freight  charges  to  be  paid  by  the  buyer: 

1629    24  pairs  Men's  Calf  Congress  at        $1 .85 

1855    24     "      Men's  Kid  "Go  Easy"  Bluchers  "  3.15 

2408    24     "      Wos.  Tan  Vici  Bluchers  "  2.25 

1311     12     "     Boys' Box  Calf  Blucher  "Mastiff"  "  1.75 

Fill  out  straight  bill  of  lading,  shipper's  number  6,  shipping  via  the  Chicago  &  Alton  railroad.     Describe 

the  shipment  as  "2  boxes  shoes."     The  agent,  H.  H.  Hill,  gives  it  the  agent's  number  5765,  enters  the 

weight  as  150  pounds,  and  returns  the  signed  original  and  memorandum  to  you.     Proceed  as  instructed 

in  previous  similar  transactions. 

Post  this  item  to  Sundry  Debtors. 

Receive  from  our  Great  Western  Factory,  Fond  du  Lac,  Wis.,  a  large  shipment  of  our 
leading  brands,  billed  at  net  prices  (Incoming  Paper  No.  95). 

Although  these  goods  are  billed  from  our  own  factory,  a  bill  to  the  Chicago  office  is  made  out  in  the 
usual  way.     Enter  the  transaction  on  the  books  just  as  you  would  enter  any  other  purchase. 

JUNE  25 

Receive  a  check  from  DeMuth  &  Co.  (Incoming  Paper  No.  96)  for  the  net  amount  of 
our  invoice  dated  June  15. 

JUNE  26 

Sell  to  DeMuth  &  Co.  on  our  regular  terms: 

1900     48  pairs  Men's  Gun  Metal  Balmorals  at        $2.50 

249     24      "      Men's  Russet  Grain  Bluchers  "  2.50 

4005     18     "      Infants' Velour  PoHsh,  patent  tip,  "  1.20 

Mail  our  check  to  A.  A.  Putnam  &  Son  to  cover  the  amount  due  on  their  invoice  of 
June  16. 

JUNE  27 

Pay  the  office  salaries  in  cash,  $36.50. 

JUNE  29 

Receive  a  Chicago  draft  (Incoming  Paper  No.  97)  from  G.  M.  Whitmore,  treasurer  of 
the  Illinois  State  Reformatory  at  Pontiac,  111.,  for  the  net  amount  of  our  invoice  of  June  18. 

See  page  158  for  the  method  of  posting  this  entry.     It  is  entered  under  Sundry  Debtors. 

Note  that  the  draft  was  originally  made  out  in  favor  of  the  Illinois  State  Reformatory  and  afterwards 
endorsed  by  them  over  to  you.  There  are  two  ways  of  remitting  by  bank  draft.  One  method  is  to  have 
the  draft  issued  by  the  bank  in  favor  of  the  person  to  whom  the  money  is  sent;  this  method  has  already 
beeri  illustrated  in  Part  I.  The  other  method  is  to  have  the  draft  issued  to  the  order  of  the  buyer,  who 
then  endorses  it  to  the  payee;  this  method  is  illustrated  in  the  above  transaction. 

The  method  illustrated  in  this  transaction  is  the  better  for  the  foUdwing  reasons:  First,  the  name 
of  the  buyer  of  the  draft  shows  on  its  face,  and  his  endorsement  is  on  the  back;  if  it  becomes  necessary 


166 


BOOT    AND    SHOE    BUSINESS 


for  him  to  prove  that  he  made  the  remittance,  this  can  be  proved  from  the  paper  itself,  which  is  returned, 
after  payment,  to  the  issuing  bank.  Second,  this  method  is  much  the  easier  and  quicker  when  several 
drafts  are  bought  at  the  same  time.  The  buyer  need  not  supply  the  bank  with  a  different  name  for  every 
draft,  and  this  saves  time  and  labor  for  both  himself  and  the  bank. 

The  bank  draft  furnishes  a  convenient  means  for  carrying  funds,  as  in  traveling,  when  one  would  not 
wish  to  carry  too  much  cash.  The  buyer  would  have  the  draft  made  out  to  his  own  order,  and  would 
cash  it  whenever  he  wished  the  money. 

Sometimes  the  buyer  of  the  draft  is  not  the  real  owner,  but  an  agent.  For  instance,  a  traveling  man 
might  make  collections  for  his  house,  receiving  checks  from  his  customers,  and  then  offer  the  checks  so 
collected  in  payment  of  a  draft  to  be  sent  to  his  house.  In  such  a  case,  the  bank  would  probably  insist 
upon  issuing  the  draft  in  favor  of  the  house,  so  as  to  protect  it  from  the  possible  fraudulent  intentions 
of  the  agent. 

Receive  a  New  York  draft  (Incoming  Paper  No.  98)  from  E.  E.  Merville,  Cleveland, 
Ohio,  for  the  amount  due  on  our  invoice  of  June  19,  less  1%  cash  discount,  and  plus  $3.75 
for  freight  charges  advanced  by  us.     Ascertain  whether  the  draft  is  properly  endorsed. 

Note  that  Mr.  Merville  is  not  entitled  to  a  discount  on  the  S3. 75.  The  cash  discount  was  taken  from 
the  amount  of  the  invoice  only. 

JUNE  80 

Post  your  books  up  to  date.  Close  the  sales  book  and  cash  book  and  post  the  foot- 
ings.    See  page  143  for  instructions  as  to  the  manner  of  closing  the  cash  book. 

The  account  of  the  Illinois  State  Reformatory  (see  transaction  June  18)  will  appear 
as  follows  when  posted  under  the  head  "Sundry  Debtors,"  except  that  the  folios  are 
omitted.     Leave  the  third  line  blank. 


19— 


SUNDRY  DEBTORS 
19— 


June 


18 


111.  State  Reformatory, 

Pontiac,  111.,  Reg. 


92 


50 


June 


Cash 
Cash  Dis. 


91 


$31226.75 

35500.00 

5900.00 

870.00 

** 


Make  statements,  using  the  following  inventories: 

Merchandise 

Real  Estate 

Furniture  &  Fixtures 

Horses  &  Wagons 

Interest  &  Discount  (A  liability  inventory) 

Discount  at  6%   on   Keith,    Fargo   &  Co.'s 

note  due  July  22   without  interest 
Expense  inventories 

45  bu.  Com  on  hand,  at  52^  **.** 

Salaries  due  bookkeeper  and  stenographer, 

2  ds.  (a  habihty  inventory)  2/7  of  $36.50  **.** 

One  month's  taxes  have  accrued  on  next  year's  account.     This  could  be  included  as  a  liability  Inven- 
tory under  Expense,  but  for  the  sake  of  simplicity  it  is  here  omitted. 


LOSS    AND    GAIN    STATEMENT 


167 


No  special  instruction  is  necessary  in  regard  to  the  Financial  Statement.     In  mak- 
ing the  Loss  &  Gain  Statement  use  the  following  form: 


LOSS  &  GAIN  STATEMENT,  JUNE  80.  19—. 
Gains 


Mdse 

Cost  (Mdse  Dr.) 
Freight 

Total  Cost 
Goods  Unsold 

Cost  of  goods  sold 

Sales  (Mdse  Cr.) 
Cost  of  goods  sold 

Interest  &  Discount 

Cr. 
Dr. 
Dr.  Invty. 

Cr. 
Dr. 

*  ** 
.** 

Cash  Discount 

Total  Gains 

** 

** 

***** 

** 

***** 

** 

**** 

** 

**** 

** 

**** 

** 

** 

** 

* 

** 

** 

** 

* 

** 

*)»*  *« 


Losses 


Real  Estate 

Dr. 

Invty. 

Dr. 
Invty. 

Dr. 

Invty. 

Dr. 

Dr.  Invty. 

Advg. 

Cr. 

Cr.  Invty. 

Total  Losses 

Net  Gain 

*** 

** 

*** 

** 
** 

** 

***** 
***** 

*. 

***** 

Furniture  &  Fix. 

****** 
**** 

Horses  &  Wagons 

*** 

Expense 

***** 
**    ** 

** 

*:i: 
** 

***    ** 

***    ** 

Note  that  Freight  is  added  into  the  cost  of  Mdse,  and  that  Advg.  is  added  into  the  cost  of  Expense. 

Close  all  loss  or  gain  accounts  in  the  ledger  so  that  they  will  show  the  results  shown 
by  the  Loss  &  Gain  Statement.  This  will  be  accomplished  by  closing  Freight  into  Mdse 
before  Mdse  is  closed,  and  closing  Advg.  into  Expense  before  Expense  is  closed.  Close 
Loss  &  Gain.  Close  the  investment  account.  Close  all  financial  accounts  except  such 
as  have  only  one  item. 


168  BOOT    AND    SHOE    BUSINESS 

Make  out  statements  for  all  open  accounts. 

The  bank  returns  to  you  checks  1  to  23  inclusive,  and  check  No.  25  canceled,  together 
with  a  monthly  statement  of  24  vouchers  returned  (Incoming  Paper  No.  99).  Make  out 
a  bank  proof. 

In  checking  for  a  bank  proof,  do  not  try  to  identify  a  check  by  the  date  as  shown  on  the  bank  state- 
ment, for  this  is  the  date  of  payment  by  the  bank  and  may  be  a  day  or  two  later  than  the  date  on  the 
check.  Compare  the  amounts  of  the  checks  issued  as  shown  by  your  check  book  stub  with  the  amounts 
shown  on  the  bank  statement. 


JOURNALIZING 

Make  journal  entries  for  the  following: 

Jan.  1,  19 — .  D.  E.  McLain  and  Myron  Keats  are  partners.  The  firm  holds  a  90-day  note  against 
H.  E.  Drake  for  $100.00  due  today  with  4%  interest  accrued.  Mr.  Drake  wishes  to  give  a  new  note  for 
the  amount  due,  the  new  note  to  mature  sixty  days  from  date,  and  to  bear  6%  interest.  The  partners 
disagree  as  to  the  advisability  of  accepting  the  new  note,  and  Myron  Keats  finally  offers  to  guarantee  it. 

Make  the  entry  in  the  firm's  journal  upon  receipt  of  the  new  note.     Then 

(1)  If  Myron  Keats  should  redeem  the  new  note  in  cash  the  day  it  is  received,  what  would  be  the 
journal  entry?    What  endorsement  would  be  necessary? 

(2)  If  Myron  Keats  should  have  the  note  endorsed  over  to  him  on  account,  what  entry  would  be 
made  in  the  journal? 

(3)  If  Myron  Keats  should  guarantee  the  note  by  a  guaranty  endorsement,  what  entry  would  be 
made? 

Why  should  Myron  Keats  prefer  either  the  first  or  second  plans  to  the  third?  Of  the  first  two  plans 
suggested,  which  is  preferable? 

Myron  Keats  withdraws  from  the  firm  of  McLain  &  Keats  on  the  first  of  February,  receiving  a  cash 
settlement  from  D.  E.  McLain,  who  continues  to  conduct  the  business  in  his  own  name.  On  Mar.  2,  H.  E. 
Drake,  not  knowing  that  his  note  has  been  assumed  by  Myron  Keats,  calls  and  pays  $102.01  to  Mr.  McLain's 
bookkeeper,  and  the  bookkeeper,  though  he  can  find  no  note,  enters  the  amount  in  the  cash  book  in  the 
usual  way,  promising  to  cancel  and  return  the  note  later.     Journalize  the  entry. 

Mar.  2,  19 — .  The  bookkeeper,  discovering  his  error,  mails  Myron  Keats  a  check  for  $102.01.  Jour- 
nalize the  entry. 

Mar.  15,  19 — .  H.  K.  Hart,  who  has  owed  McLain  and  Keats  $50.00  for  ten  years,  pays  the  account 
in  cash.  This  account  was  given  up  as  uncollectible  before  the  dissolution  of  partnership  and  was  written 
off  the  books,  being  charged  to  Loss  &  Gain.  It  was  therefore  not  considered  in  the  settlement  between 
the  partners,  and  Mr.  Keats  is  entitled  to  his  half  of  it.     Make  D.  E.  McLain's  entry. 

Mar.  20,  19 — .  At  the  time  of  the  settlement  between  the  partners,  there  were  on  hand  some  old 
fixtures  which  Mr.  McLain  refused  to  inventory  at  any  price.  These  are  sold  today  for  $12.50  cash.  Make 
D.  E.  McLain's  entry. 

April  2,  19 — .  The  Farmers'  National  Bank  failed  several  months  before  the  dissolution  of  the 
partnership  of  McLain  &  Keats,  paying  them  50%  on  a  $2500.00  deposit  balance.  The  receivers,  having 
just  sold  some  real  estate  owned  by  the  bankrupt  bank,  now  find  that  they  can  pay  another  10%.  Make 
the  entry  on  McLain's  books  for  his  half. 

Apr.  15.  H.  J.  Babb  remits  $.78  in  postage  stamps  to  cover  his  account.  Show  journalizing  for 
two  different  methods  by  which  this  entry  can  be  handled.     State  what  book  would  be  used  in  each  case. 


1051 

12 

268 

9 

2408 

12 

1726 

12 

4005 

12 

TRANSACTIONS    FOR   JULY  169 

TRANSACTIONS    FOR   JULY 

BOOT    AND    SHOE    BUSINESS CONTINUED 

JULY  1 

Pay  Geo.  S.  Haskell  by  check  for  insurance  for  one  year  as  follows,  from  the  Aetna 
Fire  Insurance  Co.  On  Mdse.,  furniture,  and  fixtures,  $29000.00,  at  $1.24  premium  for 
each  $100.00  of  insurance;  on  the  building,  $16000.00,  at  970  per  hundred.  Haskell's 
memorandum  of  premiums  due,  receipted,  is  Incoming  Paper  No.  100. 

In  addition  to  your  cash  book  entry  make  a  very  full  and  clear  memorandum  in  the  journal  embody- 
ing all  of  the  above  facts  in  regard  to  the  policy.  Your  cash  book  explanation  should  refer  to  the  page  of 
the  journal  on  which  these  facts  are  given. 

As  the  student  is  already  familiar  with  the  form  of  a  fire  insurance  policy,  this  policy  is  not  included 
in  the  outfit. 

Receive  an  invoice  from  the  Chicago  Rubber  Shoe  Co.  (Incoming  Paper  No.  101). 
Note  carefully  the  terms  and  dating;  also  the  conditions  printed  at  the  top  of  the  invoice. 
Sell  to  Streeter  Bros,  on  our  regular  terms: 

Stock  No. 

1870     12  pairs  Men's  Box  Calf  Bluchers  at  $2.65 

Men's  Vici  Kid  Congress  "  2.50 

Men's  High  Cut  Work  Shoes,  Kangaroo      "  5 .  75 

Wos.  Tan  Vici  Bluchers  "  2.25 

Children's  Kid  Bluchers,  patent  tip  "  1.20 

Infants'  Velour  Polish,  patent  tip  "  .90 

Petty  cash  sale  made  today,  $21.65. 

Detach  from  the  pad  Incoming  Paper  No,  102. 

This  check  is  drawn  on  an  Aurora  bank.  It  may  be  cashed  in  Chicago  without  the  payment  of  exchange, 
however,  because  the  Aurora  bank  has  made  arrangements  with  some  Chicago  bank  to  care  for  its  busi- 
ness through  the  Chicago  Clearing  House.  Note  that  the  check  has  printed  on  it  in  the  lower  left-hand 
corner  the  words  "Payable  through  the  Chicago  Clearing  House."  A  Clearing  House  is  an  association 
of  banks  in  a  certain  locality  having  for  one  of  its  objects  the  facilitating  of  the  exchange  between  its 
members  of  the  checks  drawn  on  each  and  cashed  by  the  others.*  An  exchange  fee  is  charged  for  cash- 
ing out-of-town  checks  unless  special  arrangements  are  made  as  above  described. 

JULY  2 

Sell  to  Willis  &  Atwood,  August  1  dating,  terms  Regular: 

1167  12  pairs  Men's  Gun  Metal  Balmorals                         at  $2.25 

761  18     "      Men's  Oil  Grain  Seamless  Balmorals            "  2.00 

1330  12     "      Little  Gents' Kid  Blucher  "Mastiff"           "  1.35 

780  12     "      Wos.  University  Vici  Kid  Bluchers             "  2.50 

1712      6     "      Children's  A.  B.  C.  Vici  Bluchers,  Pat.  tip "  .75 

Ship  to  E.  E.  Merville,  Cleveland,  Ohio,  on  an  August  1  dating,  terms  Regular: 

1900     12  pairs  Men's  Gun  Metal  Bahnorals  at  $2.50 

249     12     "      Men's  Russet  Grain  Bluchers  "  2.50 

12     "      Men's  Rubbers,  "Everstick"  "  .** 
Consult  your  price  list  for  selling  price  on  last  item. 

*  For  a  more  extended  description  of  the  clearing  house  system,  the  student  is  referred  to  "How  Busi- 
ness is  Done,"  published  by  J.  A.  Lyons  &  Company. 


170  BOOT    AND    SHOE    BUSINESS 

At  Mr.  Merville's  request,  prepay  the  freight  on  the  above  shipment,  $2.20,  and  charge 
the  amount  advanced  to  the  account  of  E.  E.  Merville  through  the  cash  book. 

Ship  via  the  B.  &  O.,  giving  the  B/L  the  number  7,  and  entering  the  goods  as  "  1  box  shoes."  Write 
"To  be  prepaid"  in  the  proper  space.  The  agent,  C.  L.  Grafton,  gives  the  B/L  the  number  21240,  enters 
the  weight  as  55  pounds,  collects  $2.20  from  you,  receipts  for  it,  and  hands  you  the  "original"  and  "mem- 
orandum" signed  for  the  company.     Proceed  as  in  previous  similar  transactions. 

Make  a  memorandum  of  the  freight  charges  in  the  sales  book,  and  add  the  amount  of  the  freight  to 
the  invoice. 

JULY  8 

Receive  a  check  from  Willis  &  Atwood  (Incoming  Paper  No.  103)  to  cover  both  bills 
sold  them  last  month,  one  due  today  less  1%  cash  discount,  the  other  due  July  11  with 
1%  cash  discount. 

Mail  our  check  to  Pingree  &  Co.,  Detroit,  Mich.,  to  cover  the  invoice  bought  of  them 
on  June  23,  less  4%. 

Pay  the  office  salaries  for  the  week  in  cash  as  follows:  Bookkeeper,  $25.00;  stenog- 
rapher, $16.50. 

JULY  6 

Receive  an  invoice  from  H.  F.  C.  Dovenmuehle  &  Son  (Incoming  Paper  No.  104). 
Note  the  terms. 

Receive  DeMuth  &  Co.'s  check  (Incoming  Paper  No.  105)  for  the  amount  due  on  the 
invoice  sold  them  on  June  26. 

Pay  by  check  the  Chicago  Record-Herald's  bill  for  advertising  (Incoming  Paper  No. 
106).     It  is  already  receipted. 

JULY  7 

Ship  C.  0.  D.  by  the  Adams  Express  Company  to  J.  H.  Cox,  Galesburg,  111.,  the  follow- 
ing invoice,  charges  collect: 

1805     24  pairs  Men's  Kid  Balmorals  at        $2 .  50 

1051     24     "      Men's  Vici  Kid  Congress  "  2.50 

1171     12     "      Men's  Vici  Balmorals,  Old  Man's  Last         "  2.00 

Make  out  an  invoice  for  the  amount  of  this  sale  less  1%  cash  discount,  and  mark  it  "C.  O.  D."    Receipt 

it  as  though  paid  today.      Take  from  your  outfit  the  Adams  Express  Go's  G.  O.  D.  envelope,  and  put 

the  receipted  G.  O.  D.  bill  inside;  the  express  company  will  deliver  it  to  the  customer  when  the  amount 

is  paid,  and  will  then  return  the  envelope  to  you  with  the  cash  returns  inclosed.     Fill  the  blanks  on  the 

outside  of  the  envelope  as  follows:     Write  the  net  amount  to  be  returned  in  the  space  opposite  the  words 

"Bill  for  collection."     Write  "Gollect"  opposite  the  words  "Gharges  for  returning  money,"  as  we  wish 

the  customer  to  pay  these  charges.     (In  business,  the  sender  would  also  mark  on  the  package  itself  the 

words  "G.  O.  D.  and  return  charges.")     Write  Mr.  Gox's  name  and  address  in  the  spaces  opposite  the 

word  "On,"  and  write  our  own  name  and  address  in  the  spaces  for  "Return  money  to."     In  the  space 

opposite  the  words  "Goods  billed  to"  write  "Galesburg,  111." 

In  practice,  such  large  shipments  as  this  would  not  be  sent  by  express,  unless  there  were  unusual 
reasons  for  haste. 

The  package  must  be  receipted  for  by  the  Adams  Express  Company.  You  will  find 
a  blank  form  of  express  receipt  in  your  outfit.  Fill  this  out  as  follows:  After  filling  in 
the  date,  write  "1  Box"  under  the  heading  Article;  insert  the  amount  to  be  collected, 


TRANSACTIONS   FOR   JULY  171 

$142.56,  in  the  C.  0.  D.  column;  insert  J.  H.  Cox's  name,  as  consignee,  and  "Galesburg, 
111.,"  as  the  destination;  under  the  heading  Charges,  write  "C.  O.  D.,"  as  we  want  the 
transportation  charges  to  be  collected  from  Mr.  Cox. 

When  the  expressman  calls  for  the  package,  he  signs  his  name,  A.  D.  Jackson,  in  the  column  headed 
Received  for  the  Company,  and  writes  the  figure  1  in  the  column  headed  No.  of  Pieces  Received.  Your 
teacher  will  give  instructions  as  to  how  this  shall  be  attended  to. 

It  is  not  necessary  for  the  shipper  to  fill  out  this  receipt,  all  but  the  expressman's  signature,  himself, 
but  it  is  generally  done  as  it  is  more  convenient  for  both  the  shipper  and  the  company  to  have  it  made 
out  in  advance.  Shippers  usually  have  receipt  books  (bound  books  supplied  by  the  company),  each  page 
of  which  is  a  blank  receipt  form.  If  a  person  shipping  is  not  a  regular  patron  of  the  company,  and  has 
no  receipt  book,  the  company  \\-ill  furnish  him  a  blank  receipt  to  fill  out  or  the  agent  will  fill  it  out  for  him. 

Charge  the  C.  O.  D.  account  with  the  full  amount  of  the  bill,  crediting  it  at  once,  through  the  Cash 
Diacount  Dr.  column  in  the  cash  book,  for  the  amount  of  the  discount. 

Discount  at  the  bank  at  4%  Fargo,  Keith  &  Co.'s  note  of  June  22  in  our  favor.  The 
note  is  non-interest-bearing.  Make  two  entries  in  the  cash  book,  one  on  each  side,  in 
the  General  column  in  each  case. 

Have  the  net  amount  allowed  you  by  the  bank  entered  as  a  deposit  in  your  pass  book. 

Pay  $100.00  for  a  year's  subscription  to  the  R.  G.  Dun  Mercantile  Agency. 

Subscribers  to  the  R.  G.  Dun  Agency  are  entitled  to  receive  the  reports  which  the  Agency  makes 

it  its  business  to  secure,  concerning  the  standing  of  merchants  throughout  the  country.      The  "credit 

man,"  who  decides  whether  or  not  credit  shall  be  extended  to  purchasers,  how  much  credit  shall  be  given 

in  each  case,  and  for  how  long  a  time  credit  shall  be  granted,  finds  Dun's  reports,  and  Bradstreet's  reports, 

of  great  value  to  him. 

JULY  8 

Sell  to  DeMuth  &  Co.,  on  our  regular  terms,  subject  to  an  August  1  dating: 

1805  12  pairs  Men's  Kid  Balmorals  at  $2 .  50 

249  9     "      Men's  Russet  Grain  Bluchers  "  2.50 

780  12     "      Wos.  University  Vici  Kid  Bluchers  "  2.45 

1846  18     "      Boys' Box  Calf  Bluchers  "  1.65 

Sell  toH.  E.  Montgomery,  Hartford,  Conn.,  on  his  60-day  note  at  6%: 

1855     12  pairs  Men's  "Go  Easy"  Bluchers  at        $3.15 

657     12     "      Youth's  Kang.  Grain  "High  Cut"  "  1.85 

4005     18     "      Infants' Velour  Polish,  patent  tip  "  1.20 

2806     12     "      Misses' Kid  Bluchers,  patent  tip  "  1.42 J 

The  freight  charges  are  to  be  paid  by  the  buyer. 

Shipment  is  to  be  made  via  the  B.  &  O.  Fill  out  the  "straight"  form  of  B/L,  giving  it  the  number  8, 
and  entering  the  description  as  "1  box  shoes."  The  agent,  C.  L.  Grafton,  will  return  two  of  the  three 
forms  to  you,  numbered  21711,  with  the  weight  entered  as  90  pounds,  signed  for  the  company.  Proceed 
as  in  previous  similar  transactions. 

Fill  out  a  note  for  Mr.  Montgomery  to  sign.  Your  teacher  or  some  student  he  may  appoint  will 
aflfix  Mr.  Montgomery's  signature. 

Three  men  have  been  at  work  today  repairing  and  varnishing  the  furniture.  Pay 
them  $3.50  each  for  their  labor,  and  reimburse  them  for  the  cost  of  varnish,  screws  and 
nails  used,  $1.50. 

Charge  this  to  Expense,  not  to  Furniture  &  Fixtures.     Why? 

JULY  9 

Receive  an  invoice  from  Guthmann,  Carpenter  &  Telling  (Incoming  Paper  No.  107)f 
Note  the  terms. 


172  BOOT   AND    SHOE   BUSINESS 

Sell  to  Fargo,  Keith  &  Co.,  on  our  regular  terms,  August  1  dating: 

1900     12  pairs  Men's  Gun  Metal  Bluchers  at  $2.75 

1855     18     "      Men's  Kid  "Go  Easy"  Bluchers  "  3.15 

1805      9     "      Men's  Kid  Balmorals  "2.50 

761     12     "      Men's  Oil  Grain  Seamless  Balmorals  "  1.50 

12     "      Men's  Para  Rubbers  "Acton"  "  .** 

12     "      Wos.  American  Rubbers  "Sensible"  "  .** 

Consult  your  price  list  for  prices  on  the  last  two  items. 

Petty  cash  sales  for  the  day,  $5.75. 

Take  this  from  the  currency  envelope. 

JULY  10 

Sell  to  Streeter  Bros.,  on  our  regular  terms: 

1167  12  pairs  Men's  Gun  Metal  Balmorals  at  $2.25 

754  18     "      Men's  Kangaroo  Grain  "Kant  Rip"  "  1.75 

2806  12     "      Misses' Kid  Bluchers,  patent  tip  "  1.42 J 

1311  9     "      Boys' Box  Calf  Blucher  "Mastiff"  «  1.75 

4005  12     "      Infants' Velour  PoUsh,  patent  tip  "  1.20 

The  Adams  Express  Company  returns  to  us  the  C.  0.  D.  Envelope  sent  out  on  the 
7th  inst.,  with  a  check  drawn  on  a  Galesburg  bank  for  $142.56  signed  by  J.  H.  Cox.  (The 
check  is  Incoming  Paper  No.  108.) 

In  practice,  this  check  would  be  returned  inside  of  the  envelope,  which  would  be  carefully  sealed. 

No  charges  were  deducted  by  the  Express  Company,  as  its  fee  was  collected  from  Mr.  Cox.  The  check 
does  not  include  exchange,  because  by  a  special  arrangement  between  the  Bank  of  Galesburg  and  its  Chicago 
correspondent  bank  (the  First  National  Bank  of  Chicago),  Mr.  Cox  has  been  given  the  privilege  of  stamp- 
ing on  his  Bank  of  Galesburg  checks  the  words  "Payable  if  desired  at  the  First  National  Bank,  Chicago," 
(see  check)  and  his  signature  is  honored  at  the  latter  bank  the  same  as  it  would  be  at  the  Bank  of  Gales- 
burg. This  is  an  unusual  condition;  a  far  more  satisfactory  plan,  at  least  as  far  as  the  First  National 
Bank  of  Chicago  is  concerned,  would  be  for  Mr.  Cox  to  carry  balances  in  both  banks. 

JULY  11 

Sell  to  Willis  &  Atwood,  on  our  regular  terms  and  on  an  August  1  dating: 

637     18  pairs  Youths' Kangaroo  Grain  "High  Cut"  at  $1.85 

675     18     "      Youths' Patent  Leather  Bluchers  "  2.40 

18     "      Boys'  Gum  Lumbermen's  Overs  "  *.** 
Consult  your  price  list  for  the  price  on  the  last  item. 

Receive  a  check  from  Streeter  Bros.  (Incoming  Paper  No.  109)  for  the  amount  of 
our  invoice  of  July  1,  less  regular  discount. 

Receive  $50.00  in  cash  from  Frazin  &  Oppenheim  to  apply  on  our  bill  of  June  20. 
Take  a  $50.00  bill  from  the  currency  envelope. 

Pay  the  office  salaries  as  on  July  3. 

Pay  $5.00  to  the  Leather  Worker's  Union  for  five  tickets  to  their  charity  ball. 

This  is  not  a  legitimate  business  expense.     Charge  the  Loss  &  Gain  account  direct. 

JULY  18 

Streeter  Bros,  claim  that  the  shoes  in  one  lot  sold  them  on  June  13  are  defective.  They 
offer  to  return  the  shoes  for  credit,  but  we  prefer  to  adjust  the  matter  by  allowing  them 
a  credit  of  150  each  on  30  pairs  No.  1311  Boys'  Box  Calf  Blucher  "Mastiff." 


TRANSACTIONS   FOR  JULY  *  173 

Debit  Mdse.  and  credit  Streeter  Bros,  through  the  journal.  Send  Streeter  Bros,  a  Credit  Memoran- 
dum, writing  out  the  form  in  full  on  blank  paper. 

In  a  business  of  any  magnitude  or  where  items  of  goods  returned  by  purchasers,  claims  allowed  pur- 
chasers on  account,  etc.,  are  frequent,  a  special  book  is  sometimes  kept  in  which  these  items  can  be  entered, 
called  the  Returned  Goods— Credit  Book.  It  is  similar  in  form  to  the  sales  book,  but  its  exact  opposite. 
The  separate  entries  are  credited  to  the  individual  parties,  and  the  total  debited  to  Mdse.  or  deducted  from 
the  total  sales. 

Receive  Streeter  Bros.'  check  (Incoming  Paper  No.  110)  for  the  balance  due  today  on 
the  bill  of  June  13,  less  discount. 

Bear  in  mind  that  they  are  not  entitled  to  any  discount  on  the  amount  of  the  allowance  we  made 
them  today. 

Pay  H.  F.  C.  Dovenmuehle  &  Son  cash  for  a  job  lot  of  men's  shoes.  Their  invoice 
is  Incoming  Paper  No.  111.     Two  entries;  why? 

A  "job  lot"  is  an  assorted  lot  of  samples,  odds  and  ends,  broken  sizes,  etc.  They  are  thrown  together 
and  sold  at  a  cheap  price. 

JULY  14 

Sell  for  cash  the  job  lot  bought  yesterday,  24  pairs  men's  shoes  at  $2.05,  receiving  a 
check  from  the  buyer       (Incoming  Paper  No.   112.) 
Enter  this  in  the  petty  cash  sales  column. 

Anticipate  the  invoice  bought  of  the  Chicago  Rubber  Shoe  Co.  on  July  1,  paying  them 
by  check  after  deducting  5%. 

Paid  Wm.  Raasch  $2,00  for  cleaning  the  windows,  scrubbing,  etc.,  today 


JULY  16 

Sell  to  DeMuth  &  Co.  on  our  regular  terms,  giving  them  an  August  1  dating: 

12  pairs  Men's  Box  Calf  Bluchers  at  $2 .  65 

Men's  Gun  Metal  Bluchers  "           2.75 

Men's  Kid  "Go  Easy"  Bluchers  "           3.15 

Men's  Kid  Balmorals  "          2.50 

Wos.  Tan  Vici  Bluchers  "          2.25 

Boys'  Box  Calf  Blucher  "Mastiff"  "           1 .75 

Little  Gents' Kid  Blucher  "Mastiff"  "          1.35 

Youths' Kangaroo  Grain  "High  Cut"  "           1.85 

Misses'  Kid  Bluchers,  patent  tip  "           1.42 J 

Infants'  Velour  Polish,  patent  tip  "             .90 

Men's  White  Duck  Balmorals  "           1.05 

Use  two  invoices  in  billing  this  order,  carrying  the  footing  of  the  first  to  the  top  of  the  second. 

We  have  had  an  addition  built  to  our  shipping  room,  for  which  we  are  charged  $320.00. 
We  have  also  had  new  floors  laid  in  the  shipping  room  and  the  walls  and  ceiling  replastered, 
at  a  cost  of  $120.00.  All  of  this  work  was  done  by  Arthur  E.  Miller,  Give  him  our  check 
for  the  full  amount. 

How  much  of  this  should  be  debited  to  Expense?  How  much  to  Real  Estate?  Give  reasons.  Make 
two  entries  in  the  cash  book.  See  page  199, 

Post  and  take  a  trial  balance  as  on  June  15.  Do  not  close  any  books  of  original  entry. 
Rule  up  personal  accounts  that  balance. 


1870 

12 

1900 

12 

1855 

12 

1805 

12 

2408 

24 

1311 

12 

1330 

12 

637 

12 

2806 

24 

4005 

12 

24 

174  ■  BOOT    AND    SHOE    BUSINESS 

JULY  16 

Sell  to  Fargo,  Keith  &  Co.  on  our  regular  terms: 

478  12  pairs  Men's  University  Velour  Calf  Bluchers  at  $2.95 

1805  12     "      Men's  Kid  Balmorals  "  2 .  50 

1855  18     "      Men's  Kid  "Go  Easy"  Bluchers  "  3.15 

637.  12     "      Youths' Kangaroo  Grain  "High  Cut"  "  1.85 

Pay  by  check  for  the  Mdse.  bought  on  July  6  from  H.  F.  C.  Dovenmuehle  &  Son,  less 
discount  allowed  by  the  terms  of  sale. 
Petty  cash  sale  made  today,  $43.75. 
Detach  Incoming  Paper  No.  113  from  the  pad. 

JULY  18 

Receive  an  invoice  from  Hamilton,  Brown  &  Co.,  St.  Louis,  Mo.  (Incoming  Paper 
No.  114).     Pay  the  freight  charges  in  cash,  $3.15. 

Sell  to  Streeter  Bros,  on  our  regular  terms,  with  an  August  1  dating: 

1311  24  pairs  Boys' Box  Calf  Blucher  "Mastiff"  at        $1.75 

4005  12     "      Infants' Velour  Polish,  patent  tip  "  1.20 

2408  12     "      Wos.  Tan  Vici  Bluchers  "2.25 

2806  18     "      Misses' Kid  Bluchers,  patent  tip  "  1.42  J 

Receive  a  Chicago  draft  from  S.  H.  East,  Indianapolis,  Ind.  (Incoming   Paper  No. 
115),  to  apply  on  the  invoice  sold  him  on  June  8.     Is  it  properly  endorsed? 
Pay  the  office  salaries  as  on  July  3. 

JULY  20 

Receive  an  invoice  from  H.  F.  C.  Dovenmuehle  &  Son.     (Incoming  Paper  No.  116.) 

Note  the  dating  and  terms. 

Sell  to  Willis  &  Atwood,  terms  Regular: 

1900  12  pairs  Men's  Gun  Metal  Bluchers  at  $2.75 

1363  9     "      Misses'  Favorite  Vici  Kid  Bluchers  "  1.15 

478  12     "      Men's  University  Calf  Bluchers  "  2.95 

780  12     "      Wos.  University  Vici  Kid  Bluchers  "  2.60 

2408  6     "      Wos.  Tan  Vici  Bluchers  "  2.25 

Streeter  Bros.'  check  received  today  (Incoming  Paper  No.  117)  is  for  the  net  amount 
due  on  the  invoice  sold  them  on  July  10. 

JULY  22 

Sell  to  DeMuth  &  Co.  on  their  60-day  note  at  6%: 

249     24  pairs  Men's  Russet  Grain  Bluchers  at  $2.50 

1900     12     "      Men's  Gun  Metal  Balmorals  "  2.50 

2408     12     "      Wos.  Tan  Vici  Bluchers  "  2.25 

1726     12     "      Children's  Kid  Bluchers,  patent  tip  "  1.20 

4005     12     "      Infants'  Velour  Polish,  patent  tip  "  .90 
Two  entries.     The  note  is  Incoming  Paper  No.  118. 

We  lose  one  of  our  horses  today,  and  purchase  another  at  once  from  W.  T.  Rinaker, 
giving  him  our  check  for  $165.00  in  payment. 

We  find  that  12  pairs  Men's  No.  3873  Blackstone  Bluchers  are  slightly  damaged. 
Return  them  to  the  firm  from  whom  they  were  purchased,  for  credit  at  $2.25  a  pair. 


1900 

12 

268 

6 

1311 

12 

1330 

12 

2408 

12 

TRANSACTIONS    FOR   JULY  175 

In  a  business  where  claims  against  creditors  for  damaged  goods,  returned  goods,  rebates,  overcharges, 
etc.,  are  frequent,  a  special  book  is  often  kept  for  these  items,  called  the  Returned  Goods — Debit  Book. 
Creditors  are  debited  for  the  separate  items,  and  the  total  is  credited  to  Mdse.  or  deducted  from  the  total 
of  purchases. 

JUL.Y  23 

Fill  the  following  order  from  Fargo,  Keith  &  Co.,  billing  on  our  usual  terms: 

1171     12  pairs  Men's  Vici  Balmorals,  Old  Man's  Last  at  $2.00 

Men's  Gun  Metal  Bluchers  "  2.85 

Men's  High  Cut  Work  Shoes  "  5.80 

Boys'  Box  Calf  Blucher  "Mastiff"  «  1 .75 

Little  Gents'  Kid  Blucher  "Mastiff"  "  1.35 

Wos.  Tan  Vici  Bluchers  "  2.25 

H.  C.  Winslow,  Treasurer  of  the  Illinois  State  Hospital  for  the  Insane  at  Jackson- 
ville, 111.,  sends  us  a  Chicago  draft  (Incoming  Paper  No.  119)  in  full  settlement  of  the 
invoice  sold  to  that  institution  on  June  23.     Is  the  draft  properly  endorsed? 

This  account  will  be  found  under  Sundry  Debtors. 

A  petty  cash  sale  was  made  today,  $12.60.     (Incoming  Paper  No.  120.) 

JULY  24 

Mrs.  Mary  Lloyde,  matron  of  the  Orphan's  Home,  1416  Michigan  Ave.,  purchases  27 
pairs  No.  1726  Children's  Kid  Bluchers,  patent  tip,  at  90^  a  pair,  to  be  charged  to  the  Home. 
Enter  this  account  under  Simdry  Debtors.     See  the  transaction  on  June  18. 

Discount  at  the  bank  at  4%  the  interest-bearing  note  we  received  on  the  22d  inst. 
from  DeMuth  &  Co.     (See  last  paragraph  under  date  of  June  11.) 

JXTLY  26 

An  invoice  is  received  from  the  Bradley  &  Metcalf  Co.,  Milwaukee,  Wis.  (Incoming 
Paper  No.  121).     Pay  the  freight  and  drayage  charges,  $1.10,  by  check  drawn  to  currency. 
Pay  by  check  H.  F.  C.  Dovenmuehle  &  Son's  invoice  of  June  20. 

This  invoice  was  sold  on  a  July  15  dating.     We  therefore  deduct  2% ,  as  the  terms  of  sale  were  2/10  n/30. 
Pay  the  ofl&ce  salaries  as  on  July  3. 

JULY  27 

Fargo,  Keith' &  Co.  settle  our  bill  of  July  16  by  a  check  for  the  amount  less  discount 
(Incoming  Paper  No.  122.) 

Petty  cash  sales  for  the  day,  $20.50. 
Take  this  amoimt  from  the  currency  envelope. 

JULY  80 
Sell  to  DeMuth  &  Co.,  terms  Regular: 

1870     12  pairs  Men's  Box  Calf  Bluchers  at  $2.65 

Men's  Gun  Metal  Bluchers  "  2.75 

Wos  Tan  Vici  Bluchers  "  2.25 

Infants'  Velour  Polish,  patent  tip  "  .90 

Men's  White  Duck  Balmorals  "  1.05' 

Men's  American  Rubbers  "Puritan"  "  .** 
Correct  your  price  list  for  the  last  item. 


1900 

12 

2408 

18 

4005 

12 

12 

12 

176 


BOOT    AND    SHOE    BUSINESS 


Also  sell  to  Fargo,  Keith  &  Co.,  on  the  same  terms: 
1607     12  pairs  Men's  King  George  Oxfords 


at 


5252 
3872 


18 
12 


Men's  Hartford  Bluchers 
Men's  Blackstone  Bluchers 


$2.60 
1.85 
2.25 


Receive  a  check  from  Willis  &  Atwood  (Incoming  Paper  No.  123)  to  cover  our  bill 
of  July  20  less  the  usual  discount. 

JULY  81 

Post  all  your  books  up  to  date. 

Take  a  trial  balance. 

Make  statements,  using  the  following  inventories: 

Merchandise $30,734 .90 

Real  Estate 35,800 .00 

Furniture  &  Fixtures 5,900 .00 

Horses  &  Wagons 870 .00 

Interest  &  Discount 

Interest  onH.  E.  Montgomery 's  note,  $**.**,  for  **  ds.  at  6% .  ** 

Expense  Inventories 

Salaries  due  for  5  days **  ** 

Insurance  paid  up  for  11  months *** .  ** 

In  making  your  statements  proceed  just  as  you  did  on  June  30. 

Note  that  the  inventory  of  Real  Estate  has  not  been  materially  depreciated,  and  the  inventory  of 
Furniture  &  Fixtures  has  not  been  changed. 

The  fact  that  the  Furniture  &  Fixtures  inventory  remains  unchanged  makes  it  unnecessary  to  close 
that  account  in  the  ledger,  or  to  include  it  in  the  loss  and  gain  statement. 

Some  bookkeepers  go  to  great  lengths  to  estimate  inventories  of  interest  on  overdue  accounts  and 
inventories  of  cash  discounts  which  will  be  allowed  next  month  on  goods  sold  this  month.  The  student 
need  not  attempt  to  do  this.     Compute  only  the  inventories  indicated  in  the  above  list. 

Close  your  ledger,  following  the  instructions  given  on  June  30. 

Make  out  statements  of  all  open  accounts. 

The  bank  returns  paid  checks  Nos.  25  to  41,  No.  43,  and  No.  45,  together  with  its 
monthly  statement  (Incoming  Paper  No.  124).  Reconcile  the  statement  with  your 
check  book. 


PROBLEMS 

1.  A's  net  capital  on  Jan.  1  was  $5674.60.  On  Jan.  10  he  withdrew  $75.00  for  his  personal  use, 
and  on  Jan.  20  he  added  $1500.00  to  his  investments.  On  Jan.  31  his  assets  amounted  to  $9375.00  and 
his  liabilities  were  $1875.65.     What  was  the  amount  of  his  gain  or  loss  during  January? 

2.  B's  trial  balance  on  Feb.  28  was  as  below.  His  Mdse  inventory  was  $5580.00.  What  was  his 
gain  between  the  last  time  the  books  were  closed  and  Feb.  28? 


B 

Cash 

Mdse 

Expense. . , 
Notes  Rec. 
Accts.  Rec, 
Notes  Pay. 
Accts.  Pay 


1245 

6000 

200 

1300 

576 

450 


20 
00 
00 
00 
00 
00 


6574 

1000 

200 

1375 
621 


55 

00 

00 

00 
65 


SUPPLEMENTARY    PROBLEMS  "  177 

3.  C  and  D  are  partners  under  an  agreement  that  each  is  to  be  allowed  interest  at  6%  on  his  invest- 
ment and  that  the  profit  remaining  after  the  partners  are  credited  for  such  interest  is  to  be  equally  divided. 
C's  investment  on  March  1  is  $6000.00,  D's  investment  on  the  same  date  is  $7000.00.  On  March  31  the 
firm's  capital  is  $14000.00.  What  is  the  investment  of  each  partner  on  March  31,  neither  partner  having 
withdrawn  any  interest  or  profits? 

4.  E,  F  &  G  are  partners  with  respective  investments  on  Apr.  1  of  $4000.00,  $5000.00,  and  $8000.00. 
Their  agreement  is  that  each  is  to  be  allowed  a  monthly  salary  of  $100.00  and  7%  interest  on  investment, 
the  remaining  profit  to  be  equally  divided  between  them.  April  15,  E  withdrew  $100.00,  and  G  with- 
drew $200.00,  On  April  20,  F  added  $500.00  to  his  investment.  On  April  30  the  firm's  capital  was 
$18000.  No  partner  having  withdrawn  any  salary  or  interest  or  profits,  what  was  the  investment  of 
each  on  April  30? 

5.  H,  I  and  J  are  partners  under  an  agreement  that  each  is  to  be  allowed  6%  interest  on  his  invest- 
ment and  to  participate  equally  in  the  balance  of  the  profits.  On  May  31,  interest  for  one  month  was 
allowed  the  partners  as  follows:  H,  $30.00;  I,  $40.00;  J,  $45.00,  and  $450.00  was  left  to  divide  equally 
as  profits.  What  was  the  capital  of  each  partner  on  May  31,  no  partner  having  withdrawn  any  interest 
or  profits? 


INSOLVENCY  AND   BANKRUPTCY 

The  terms  "insolvency"  and  "bankruptcy"  are  often  confused  by  persons  who 
imagine  that  they  are  synonymous.  They  are  not.  Both  terms  imply  a  condition  wherein 
the  proprietor  is  unable  to  pay  his  debts,  but  here  the  resemblance  ends. 

When  a  man's  liabilities  are  in  excess  of  his  assets,  his  business  is  in  a  condition  of 
insolvency,  and  he  is  insolvent. ,  Many  a  man's  business  has  been  in  this  condition,  how- 
ever, and  yet  he  has  been  able  to  "pull  through"  without  being  declared  a  bankrupt. 
He  has  been  able  to  keep  the  secrets  of  his  business  to  himself  and  to  meet  his  obligations 
as  they  fall  due,  until  more  prosperous  times  have  changed  his  condition  to  that  of  com- 
plete solvency.  In  other  words,  he  has  continued  to  make  money  and  his  assets  have 
grown  until  they  exceeded  his  Habilities. 

On  the  other  hand,  it  is  not  unusual,  especially  during  "hard  times,"  for  a  perfectly 
solvent  business  to  be  forced  into  bankruptcy.  A  bankrupt  is  one  who  has  been  legally 
declared  unable  to  pay  his  debts,  and  whose  property  has  been  seized  for  the  benefit  of 
his  creditors.  Sometimes  the  creditors  of  a  bank  (its  depositors)  become  without  good 
reason  afraid  that  the  bank  will  fail  and  their  money  be  lost.  A  "run  on  the  bank" 
results,  each  depositor  demanding  all  his  money  in  cash.  The  bank  is  unable  to  pay 
them  and  unable  to  borrow  enough  cash  to  pay  them.  A  receiver  is  appointed,  who 
proceeds  to  sell  the  bank's  properties  and  investments,  perhaps  being  unable  to  get  for 
them  anything  near  their  real  value,  or  what  the  bank  could  have  realized  upon  them 
had  it  been  given  time.  Thus  a  perfectly  good  business  has  been  bankrupted  through  a 
peculiar  chain  of  circumstances. 

Insolvency  is  a  business  condition  which  may  or  may  not  become  publicly  known. 
Bankruptcy  is  a  legal  condition  wherein  the  affairs  of  the  bankrupt  are  settled  by  a  receiver 
appointed  by  a  court. 

Bankruptcy  may  be  voluntary  or  involuntary.  That  is,  a  man  may  declare  himself 
a  bankrupt,  or  he  may  be  declared  bankrupt  through  legal  proceedings  started  by  his 
creditors.  When  his  affairs  are  once  settled  by  proceedings  in  bankruptcy,  each  creditor 
receiving  a  proper  proportion  of  the  net  cash  realized  from  a  full  settlement  of  his  affairs, 
he  begins  life  anew,  owing  no  one. 


178 


SUPPLEMENTARY  PROBLEMS 


PBOBLEMS 

1.  A  was  adjudged  a  bankrupt.  The  net  cash  remaining  after  his  property  was 
sold  and  the  receiver's  expenses  were  paid  was  $10000.00.  His  debts  were  as  follows: 
He  owed  B,  $5000.00;  C,  $4000.00;  and  D,  $3000.00.     How  much  did  each  creditor  receive? 

2.  E  failed  owing  F,  $2500.00;  G,  $3500.00;  and  H,  $4000.00.  His  assets  brought 
$8000.00  and  the  legal  expenses,  which  had  to  be  paid  in  full  before  any  creditors  were 
satisfied,  amounted  to  $500.00.  What  percent  did  each  creditor  receive?  How  much 
money  did  each  creditor  receive?  How  much  did  E  owe  to  F,  G  and  H  after  the  settle- 
ment in  bankruptcy  was  made? 

3.  I  became  a  bankrupt  with  assets  which  brought  $12000.00,  and  owing  the  follow- 
ing persons:  J,  $6000.00;  K,  $5000.00;  and  L  $8000.00.  The  workmen's  payroll  amounted 
to  $400.00  and  was  unpaid.  (Workmen  are  preferred  creditors.)  The  receiver's  expenses 
amounted  to  $600.00.     How  much  did  the  creditors  each  receive? 

4.  L's  store  burned  down  on  July  1.  He  had  no  insurance  on  his  store,  his  furniture 
and  fixtures,  or  his  stock  of  Mdse,  and  all  were  completely  destroyed.  The  City  Wreck- 
ing Co.,  however,  made  him  an  offer  of  $50.00  for  the  wreckage,  and  the  lot  on  which 
his  store  had  stood  was  worth  $5000.00.  L's  balance  of  the  closed  ledger  June  30  showed 
the  following  items:  L  (Capital),  Cr.  $10950.00;  Cash,  Dr.  $2000.00;  Mdse  (Invty),  Dr. 
$6540.00;  Furn.  &  Fix.  (Invty),  Dr.  $1000.00;  Real  Estate,  Dr.  $10000.00;  Accounts 
Receivable,  $3500.00;  Accounts  Payable,  $12090.00. 


L 

Cash  (in  Bank) 

Mdse  (Invty) 

Fur.  &  Fix.  (Invty) 

Real  Estate 

Accounts  Receivable 
Accounts  Payable  .  . 


2000 
6540 
1000 
10000 
3500 


23040 


00 
00 
00 
00 
00 


00 


10950 


12090 


23040 


00 


00_ 

oo" 


Immediately  after  the  fire,  L's  creditors  instituted  proceedings  in  bankruptcy  against 
him.  The  receiver  took  possession  of  the  cash  in  bank,  sold  the  land  for  $5000.00,  accepted 
the  City  Wrecking  Co.'s  offer  for  the  wreckage,  and  collected  the  accounts  receivable. 
The  receivers'  fees  and  expenses  amounted  to  $410.00.  What  percentage  of  his  original 
claim  did  each  creditor  receive? 

5.  M,  a  dealer  in  clothing,  has  a  record  as  follows:  In  1902  he  had  a  fire,  and  was 
fully  insured.  In  1904  he  filed  a  voluntary  petition  in  bankruptcy.  In  1905  he  had 
another  fire,  having  insured  his  stock  of  goods  heavily  only  two  months  before.  You 
know  of  a  concern  which  has  held  a  bill  against  him  since  July  1,  1904,  which  he  now 
refuses  to  pay  because  it  is  outlawed.  He  now  writes  you  ordering  a  bill  of  goods  to  be 
shipped  to  him  on  90  days'  credit.     Write  an  answer  to  his  letter. 

6.  Read  the  following  newspaper  clipping.  If  the  court  appoints  a  receiver  for 
the  Miller  Products  Co.,  how  much  will  the  receiver  pay  each  of  the  creditors  named, 
assuming  the  total  expenses  of  the  receivership  to  be  $5000.00? 

The  Miller  Products  Company,  which  deals  in  flour,  owes  debts  amounting  to  $90,000.00,  according 
to  the  petition  of  creditors  filed  by  attorneys  Gregory,  Poppenhausen  &  McNab.  The  company's  assets 
are  $80,000.00.  The  Pillsbury  company  has  a  claim  of  $30,000.00.  Besides  the  Pillsbury  concern  as 
the  chief  petitioning  creditors,  Frank  Clark  of  Chicago,  with  a  claim  of  $112.50,  and  John  T.  Canvin  of 
Chicagp,  with  a  claixn  of  $100.00,  are  named. 


SUPPLEMENTARY    PROBLEMS  179 


CORRECTING  ERRORS 

In  correcting  errors,  the  bookkeeper  is  called  upon  for  the  exercise  of  considerable  judgment,  skill, 
and  good  taste.  The  kinds  of  errors  that  can  exist  are  so  numerous  and  the  methods  of  correction  so 
various,  that  general  rules  to  fit  all  cases  cannot  be  laid  down.  There  are  certain  things,  however,  that 
the  bookkeeper  should  always  have  in  mind  in  making  a  correction:  (1)  The  incorrect  entry  must 
be  removed.  (2)  The  correct  entry  must  be  made.  (3)  The  books  must  not  seem  to  have  been 
fraudulently  tampered  with.      (4)     The  neat  appearance  of  the  books  must  be  preserved  if  possible. 

Simple  methods  of  making  corrections  are  always  best.  If  an  entry  has  not  been  posted,  draw  lines 
through  the  items  neatly  or  write  the  word  "void"  across  the  entry  and  place  check  marks  in  the  folio 
column  opposite  the  items,  so  that  they  cannot  be  posted.  This  effectually  removes  the  error  and  the 
correct  entry  can  then  be  made  and  posted  in  the  usual  way.  Do  not  erase  or  change  figures,  as  that 
might  give  an  appearance  of  fraudulent  entry.  Let  the  books  show  that  an  incorrect  entry  has  been 
made  and  ruled  off  or  voided.  In  making  corrections  in  books  of  original  entry,  it  is  especially  important 
that  this  rule  be  carefully  observed,  since  these  books  are  admissible  as  evidence  in  a  court  of  law,  and 
any  appearance  of  fraudulent  alterations  or  erasures  would  have  a  tendency  to  impair  their  credibility. 

Even  when  an  entry  has  been  posted,  the  plan  suggested  in  the  foregoing  paragraph  can  be  followed^ 
by  making  corrections  in  the  ledger  in  the  same  way,  provided  the  ledger  accounts  are  not  closed,  and 
also  provided  the  sales  book  or  other  books  of  original  entry  are  not  footed  and  posted. 

Correction  Entries.  WTien  an  entry  has  been  carried  along  so  far  into  the  books  that  the  simple 
method  of  correction  suggested  in  the  foregoing  is  not  practicable,  correction  entries  must  be  resorted  to. 
If  a  certain  account  has  been  charged  or  credited  too  little,  or  an  entire  entry  has  been  omitted,  the  dis- 
crepancy or  omission  can  be  cared  for  easily  and  simply,  by  making  another  entry.  If  an  account  has 
been  debited  or  credited  too  much,  a  reverse  or  counter  entry  becomes  necessary,  the  effect  of  which  will 
be  to  subtract  the  amount  of  the  over-charge  or  over-credit.  If  an  entry  has  been  made  debiting  an 
account  which  should  have  been  credited  or  crediting  an  account  which  should  have  been  debited  a  reverse 
entry  for  the  exact  amount  of  the  original  error  will  have  the  effect  of  canceling  it,  after  which  the  correct 
entry  must  be  made;  or  a  reverse  entry  for  double  the  amount  will  have  the  effect  of  wiping  off  the  error 
and  at  the  same  time  placing  the  correct  entry  on  the  books.  Changes  should  be  made  without  resort- 
ing to  correction  or  reverse  entries,  if  possible.  Whenever  any  entry  is  ruled  off,  voided,  or  corrected, 
reference  should  there  be  made  to  the  page  where  the  correct  entry  or  the  correction  entry  is  found;  and 
the  new  entry  or  the  correction  entry,  as  the  case  may  be,  should  refer  to  the  former  entry.  When  state- 
ments of  account  are  copied  from  ledger  accounts  which  have  been  corrected,  they  should  show  only  the 
correct  data  as  it  would  stand  had  there  been  no  error  in  the  first  place — this,  by  the  way,  furnishes  one 
reason  correction  entries  should  be  avoided  if  possible,  as  it  is  easier  and  less  confusing  to  copy  statements 
from  a  ledger  that  is  not  full  of  correction  entries.     Make  correction  entries  for  the  following: 

Problem  1.  In  a  certain  business,  A  has  a  half  interest,  and  B  and  C  each  a  one-fourth  interest. 
After  closing  the  books  on  Feb.  1,  19 — ,  and  crediting  the  account  of  each  partner  with  his  share  of  the 
profits,  it  is  discovered  that  Field  and  Co.  have  a  bill  against  the  firm  for  Mdse,  $120.00,  which  has  never 
been  entered.  The  bill  falls  due  Feb.  10.  WTiat  entries  are  necessary  for  adjusting  this  on  Feb.  10  with- 
out reopening  the  Merchandise  account;  in  what  book  shall  they  be  made,  and  how? 

Problem  2.  On  Mar.  31,  19 — ,  the  bank  notified  you  that  interest  amounting  to  $4.50  had  been 
passed  to  your  credit,  and  you  entered  this  on  the  credit  side  of  the  cash  book  by  mistake,  afterwards 
closing  the  cash  book.  What  entry  or  entries  are  necessary  to  make  the  correction;  in  what  book  shall 
they  be  made,  and  how? 

Problem  3.  Feb.  1,  19 — .  Smith  &  Co.  keep  a  three-column  cash  book  (same  form  as  used  in  Boot 
and  Shoe  business).  They  have  just  closed  this  cash  book  with  a  balance  of  $177.91  brought  down,  but 
have  only  $133.54  in  cash  actually  on  hand.  On  examination,  you  find  the  following  errors:  (1)  On  Jan. 
4,  $45.37  was  paid  out  in  cash  but  the  amount  was  by  mistake  entered  in  the  Cash  Discount  Cr.  column 
instead  of  the  General  Column.  (2)  The  footing  of  the  General  column  on  the  debit  side  of  page  101  was 
forwarded  to  page  102  as  $2525.75,  instead  of  $2516.75  as  it  should  have  been.  (3)  D.  C.  Brown,  a  cus- 
tomer, paid  $10.00  on  account  on  Jan.  20,  and  the  item  was  not  entered  in  the  cash  book. 

Rule  a  form  of  three-column  cash  book,  enter  the  balance  as  Smith  &  Co.  had  it  on  Feb.  1,  make  the 
correction  entries,  and  make  another  closing,  which  will  give  the  correct  balance. 


DRY    GOODS   BUSINESS 

A  large  wholesale  or  jobbing  house  in  the  dry  goods  line  usually  has  many  depart- 
ments. Dress  goods,  silks,  domestics,  notions,  etc.,  are  handled  in  separate  departments, 
each  having  its  own  manager.  Employees,  except  general  salesmen  and  other  employees 
directly  connected  with  the  head  office,  usually  work  in  one  department  only. 

All  articles  of  Mdse  are  not  billed  on  the  same  terms  of  credit,  but  each  has  its  own 
terms  of  sale.  A  customer  might  order  a  number  of  items  at  the  same  time  and  find 
some  billed  to  him  at  2/10  1/30  n/60,  some  at  2/10  n/30,  some  at  1/10  n/30,  some  at 
6/10  5/30  4/60,  some  net  cash,  etc.  These  items  might  be  listed  one  after  another  on 
his  bill  and  the  terms  of  discount  separately  noted  after  each  item;  they  might  be  all  on 
one  bill  but  classified  as  to  terms  of  discount  by  the  use  of  special  columns;  or  the  items 
might  be  classified  as  to  terms  of  discount,  and  a  separate  invoice  rendered  for  each  class. 

Just  what  the  terms  shall  be  depends  largely  upon  the  customs  in  the  locality  where 
the  goods  are  sold,  and  upon  the  conditions  of  trade  at  the  time  of  sale.  Competition 
influences  discounts,  the  tendency  being  for  competitive  houses  to  offer  the  same  terms 
on  the  same  articles.  In  this  way,  the  terms  offered  by  leading  wholesale  dry  goods 
houses,  such  as  Marshall  Field  &  Co.,  Chicago;  The  H.  B.  Claflin  Co.,  New  York;  John 
V.  Farwell  &  Co.,  Chicago;  Carson,  Pirie,  Scott  &  Co.,  Chicago;  and  Ely  &  Walker,  St. 
Louis;  go  far  toward  establishing  the  terms  of  sale  used  throughout  the  country.  Many 
smaller  houses,  however,  will  offer  larger  than  the  customary  discounts,  as  an  induce- 
ment to  get  trade.  In  a  general  way,  it  may  be  said  that  small  discounts  are  usually 
offered  on  staple  articles,  while  larger  discounts  are  offered  on  fancy  goods,  laces, 
embroideries,  etc. 

The  transactions  which  follow  are  of  necessity  brief — too  brief  for  any  attempt  to 
show  the  division  of  the  business  into  departments  or  to  illustrate  the  somewhat  elaborate 
systems  of  house  management,  procedure  in  buying  and  selling,  methods  of  billing,  etc., 
that  usually  obtain  in  the  larger  houses.  The  accounting  methods  will  of  necessity  be 
much  simpler  than  those  actually  in  use  in  large  wholesale  dry  goods  concerns,  many 
subordinate  and  auxiliary  features  being  omitted.  But  the  transactions  presented  are 
typical  of  the  business  from  which  they  were  selected,  and  are  arranged  to  take  you  one 
step  farther  in  your  study  of  bookkeeping. 

Books  Used. 

The  books  used  in  the  transactions  for  August  and  September  are  the  Journal,  Sales 
Book,  Purchase  Book,  Cash  Book,  Ledger,  and  Bill  Book.  All  of  these,  except  the  Pur- 
chase Book,  are  books  with  which  you  are  already  familiar,  and  will  be  handled  just  as 
in  previous  sets.     A  special  explanation  of  the  Purchase  Book  follows. 

The  Purchase  Book. 

This  book  is  similar  to  the  sales  book  in  principle.  All  purchases  of  Mdse  are  entered 
in  it  and  omitted  from  the  journal.     The  items  are  separately  posted  to  the  credit  of 

180 


THE  PURCHASE  BOOK 


181 


those  from  whom  the  purchases  are  made,  and  the  total  is  periodically  posted  to  the  debit 
of  the  Mdse.  Purchases  account,  about  which  you  will  read  on  the  next  page. 

The  Purchase  Book  presents  the  same  advantages  as  the  Sales  Book.  Its  use  materially  reduces 
the  number  of  entries  in  the  journal.  The  entries  occupy  less  space  than  they  would  in  a  journal.  The 
labor  of  posting  (as  far  as  those  entries  are  concerned)  is  reduced  one-haK. 

The  classification  of  entries  by  the  use  of  special  books  is  not  only  valuable  in  itself,  but  makes  possi- 
ble a  division  of  labor.  One  bookkeeper  can  work  on  the  sales  book,  another  on  the  purchase  book,  etc. 
This  division  of  labor  can  be  canied  out  still  further,  if  the  magnitude  of  the  business  demands  it,  by  sub- 
dividing the  sales  book  and  piu-chase  book  alphabetically,  territorially,  or  by  departments. 

In  form,  the  Purchase  Book  is  as  follows : 

19 — .  August  1,  19 — 


Aug. 


July 
Aug. 


John  V.  Farwell  &  Co.,  148  Market  St. 
H.  B.  Claflin  Co.,  New  York 
Marshall  Field  &  Co.,  200  Adams  St. 
V.  Perrin  &  Cie,  Grenoble,  France 
Ely  &  Walker,  St.  Louis 

Mdse.  Purchases  Dr.  for  Total 


2/10  n/60 

1/10  n/30 

30-day  note  at  6% 

2/30  n/60 

6/10  5/30  4/60 


870 
760 
950 
110 
35450 


304525 


(The  above  form  is  an  illustration  only) 

Note  that  the  date  is  written  at  the  left  and  that  each  item  occupies  one  line,  which  contains  the 
date,  space  for  the  ledger  foUo,  the  name  of  the  account  to  be  credited,  the  address,  terms,  and  amount. 
The  date  given  should  always  be  the  date  of  the  invoice,  not  the  date  on  which  the  invoice  was  received. 
The  second  item  in  the  above  form  is  an  illustration  of  this.  The  invoice  was  received  on  August  3,  but 
the  date  recorded  is  August  1,  which  was  the  date  the  invoice  was  shipped  and  billed  from  New  York. 
This  plan  of  dating  enables  the  bookkeeper  to  ascertain  the  due  date  easily,  since  the  discoimt  period 
begins  to  run  from  the  date  of  the  invoice. 

As  invoices  are  received  they  are  usually  given  a  serial  number,  which  is  recorded  in  the  Purchase 
Book,  but  this  feature  is  omitted  from  this  set. 

In  connection  with  the  Purchase  Book,  some  device  for  calling  the  attention  of  the  bookkeeper  to 
the  dates  on  which  discounts  may  be  secured,  is  usually  adopted.  This  might  be  a  filing  device,  wherein 
each  bill  could  be  filed  under  the  date  of  its  maturity;  it  might  be  a  register,  somewhat  similar  to  a  bill 
book,  the  central  feature  of  which  would  be  a  series  of  columns  for  the  different  months,  in  which  the  dis- 
count dates  of  each  invoice  could  be  shown;  or  it  might  be  some  other  device  of  filing  or  of  record,  the 
purpose  of  which  would  be  to  show  the  dates  of  maturity.     None  of  these  au:dUaries  will  be  used. 

Discounts. 

Some  houses  make  it  a  rule  to  pay  all  bills  promptly,  doing  away  entirely  with  the  purchase  book 
and  with  all  purchase  accounts.  Two  plans  for  affecting  this  are  in  general  use:  (1)  To  pay  all  bills  as 
they  fall  due,  incidentally  taking  all  discounts  offered  for  payment  within  a  certain  time.  In  this  case  it 
is  only  necessary  to  estabhsh  some  device  for  keeping  track  of  the  bills  so  that  no  discounts  will  be  lost. 
Amounts  paid  are  debited  directly  to  the  Mdse.  account  or  other  account  affected,  at  the  time  of  payment. 
(2)  To  pay  once  a  month  the  amounts  called  for  by  the  creditors  in  their  monthly  statements.  If  this  plan 
be  followed  it  is  necessary  to  save  the  bills  until  they  can  be  checked  against  the  statement  to  prove  the 
accuracy  of  the  latter.  At  the  time  of  payment  the  amount  paid  on  each  statement  is  distributed  among 
the  accounts  which  should  be  charged.     In  either  case  all  old  bills  are  saved  as  records  for  future  reference. 

Nowhere  is  it  more  evident  than  in  the  dry  goods  business  that  the  man  who  would 
make  money  must  take  advantage  of  his  discounts.  Competition  is  keen  and  the  margins 
of  profit  are  small.  The  jobber  especially  must  not  fail  to  discount  his  bills.  On  many 
articles,  the  wholesale  price  is  a  matter  of  public  knowledge.  Regular  market  quotations 
on  some  staple  lines  are  pubUshed  monthly  in  some  of  the  leading  dry  goods  journals. 
On  these  articles  the  jobber  must  be  able  to  quote  prices  not  materially  different  from 


182  DRY  GOODS  BUSINESS 

published  market  prices.  He  is  assisted  somewhat  by  special  trade  discounts  and  other 
concessions  he  is  able  to  secure  from  manufacturers,  but  competition  is  so  keen  that  he 
must  take  advantage  of  his  cash  discounts  or  his  business  will  not  be  profitable. 

When  a  dealer  buys  Mdse  on  the  terms  "2/10  n/30",  he  has  an  opportunity  to  save  2%  by  paying 
the  bill  20  days  before  he  would  have  to  pay  it  anyway.  If  he  could  save  2%  every  20  days,  he  would 
save  36%  in  the  course  of  a  year —  a  very  good  percentage  of  profit. 

The  trade  discounts  and  cash  discounts  secured  by  the  jobber  on  his  purchases  are  largely  a  matter 
of  bargaining  between  himself  and  the  wholesaler;  and  the  selling  terms  vary  and  fluctuate  with  the  con- 
ditions of  trade.  Therefore  in  the  wholesale  dry  goods  line  it  cannot  be  said  that  the  terms  either  of  pur- 
chase or  of  sale,  are  weU  estabUshed  and  practically  invariable,  as  in  some  other  lines. 

Practically  no  Dating  Ahead. 

Dating  ahead  on  invoices  sold  is  not  a  customary  practice  in  this  line,  as  it  is  in  some 
other  lines.  When  an  advance  dating  is  given  it  is  usually  for  the  purpose  of  accommo- 
dating a  customer  by  enabling  him  to  dispose  of  his  goods  before  his  bill  for  them  falls 
due.  He  is  not  supposed  to  anticipate  such  a  bill,  and  anticipation  of  post-dated  bills 
is  practically  unknown  in  the  dry  goods  business,  though  it  would  probably  be  permitted, 
at  prevailing  interest  rates.  The  securing  of  advance  datings  on  purchases  is  largely  a 
matter  of  bargaining  between  the  jobber  and  the  wholesaler. 

Freight. 

Freight  on  goods  sold  by  the  jobber  is  presumed  to  be  paid  by  the  retail  merchant. 
Sometimes  freight  is  prepaid  to  certain  stations  where  there  are  no  agents,  or  express 
is  prepaid  in  cases  where  a  cheaper  rate  can  be  secured  by  so  doing;  but  in  such  cases  the 
charges  so  advanced  are  almost  always  charged  to  the  buyer.  Cases  when  the  freight 
expense  on  sales  is  borne  by  the  jobber  are  very  rare. 

Importing. 

When  an  invoice  comes  from  abroad,  there  is  a  Customs  House  duty  to  pay.  This 
may  be  a  specific  duty,  or  ad  valorem,  or  both.  A  specific  duty  is  a  duty  based  upon  the 
weight  or  measure  of  the  article  without  regard  to  its  value.  Ad  valorem  duty  is  a  duty 
of  a  certain  per  cent  of  the  cost  of  the  goods  imported. 

When  foreign  invoices  are  received,  it  is  not  possible  to  enter  them  on  our  books  accurately  in  the 
original  entry.  Suppose,  for  instance,  an  invoice  should  be  received  amounting  to  £100,  due  in  4  months. 
An  accurate  entry  cannot  be  made,  because  nobody  knows  what  £100  will  be  worth  in  U.  S.  money  in 
4  months,  owing  to  the  fluctuation  in  the  rate  of  exchange  between  this  country  and  England.  An  entry 
at  the  exact  rate  of  exchange  current  on  the  date  of  the  purchase  would  be  unreUable.  It  is  customary 
to  use  an  approximately  coiTect  rate  of  exchange  (in  the  case  of  English  pounds,  $4.90)  in  computing 
the  amount  of  the  original  entry.  When  the  bill  is  eventually  paid,  the  discrepancy  between  the  rate 
of  exchange  entered  in  the  books  and  the  actual  rate  paid,  will  operate  either  as  an  increase  or  a  decrease 
of  the  amount  of  cash  discount.    This  will  be  treated  more  definitely  in  connection  with  specific  transactions. 

PROBLEMS  IN  FOREIGN  EXCHANGE 

1.  What  is  the  cost  of  a  draft  on  London  for  £890,  the  exchange  rate  being  $4,863? 

2.  "         "        "       "  "        Berhn  for  720  marks,  a  Reichsmark  (4  marks)  being  worth  94f^? 

3.  "         "        "       "         "        Parisfor  456 francs,  therateofexchangebeing5.15francstothedolIar? 

4.  What  would  have  been  the  cost  in  each  of  the  above  cases  had  a  2%  cash  discount  been  secured 
on  the  amount  named? 

The  Merchandise  Account  Subdivided. ' 

For  the  purpose  of  a  closer  analysis  of  the  merchandise  transactions,  three  merchan- 
dise accounts  will  be  kept  instead  of  one,  as  shown  by  the  following  diagram: 


^S^L^^^'^^^JyM^.f^      '  f 


THE   MERCHANDISE  ACCOUNT  SUBDIVIDED 


183 


Freight  &  Duties 


Hdse.  Piircliases 


Mdse.  Sales 


Mdse.  (Trading) 


The  Mdse.  Purchases  account. 

This  account  is  debited  at  the  end  of  thef  month  with  the  total  purchases  for  the  month, 
as  posted  from  the  purchase  book.  It  is  also  debited  at  the  end  of  the  month  with  the  total 
of  the  Freight  &  Duties  account,  which  account  is  closed  into  it,  as  shown  in  the  diagram. 
It  is  credited  during  the  month  with  amounts  of  goods  returned  by  us  to  creditors,  as  posted 
from  the  journal.  The  final  result  shown  by  this  account  is  the  net  purchases  for  the  month. 
It  is  closed  into  the  Mdse  (Trading)  account,  as  shown  by  the  diagram. 

The  Mdse.  Sales  account. 

This  account  is  credited  at  the  end  of  the  month  with  the  total  sales  for  the  month, 
as  posted  from  the  sales  book.  It  is  also  credited  at  the  end  of  the  month  with  the  total 
of  petty  cash  sales,  as  posted  from  the  cash  book.  It  is  debited  during  the  month  with 
amounts  of  goods  returned  to  us  by  customers,  as  posted  from  the  journal.  The  final 
result  shown  by  this  account  is  the  net  sales  for  the  month.  It  is  closed  into  the  Mdse. 
(Trading)  account,  as  shown  by  the  diagram. 

The  Mdse.    (Trading)  accoiint. 

The  trading  or  general  merchandise  account  is  the  principal  merchandise  account, 
and  the  one  into  which  the  other  merchandise  accounts  are  closed.  At  the  beginning 
of  the  month  it  is  debited  with  the  inventory  at  that  time.  At  the  end  of  the  month  the 
Mdse.  Purchases  and  Mdse.  Sales  accounts  are  closed  into  it.  It  is  then  credited  with  the 
inventory  at  the  end  of  the  month  and  closed  into  the  Loss  &  Gain  account. 

Problems  1,  2  and  3  of  the  supplementary  problems  following  this  set  may  be  solved  at  this  time 
if  desired. 
Accounts  Kept. 

Open  the  following  accounts  in  the  ledger,  allowing  for  each  account  one  line  for 
the  heading,  one  line  for  the  top  ruling,  and  for  the  entries  the  number  of  lines  indicated. 

Jas.  H.  Morrison 10  Knes    y^.  B.  Palmer  &  Co.,  Lawrence,  Kan 7  lines 

V^hur  E.  Clark 10  Hnes     v^lackman  Bros.  «fe  Co.,  Pullman,  Wash 7  hnes 

^urnitur^  &  Fixtures 11  hnes    ^.  C.  Nichol,  Foley,  Minn 7  hnes 

-^dse  Purchases 8  lines  ^^awndale  Dry  Goods  Co.,  1579  Ogden  Ave.  8  lines 

/Mdse  Sales 8  lines  ^^askett  &  Co.,  579  Madison  St 10  hnes 

x^Idse  Trading 8  hnes    xC.  A.  Ross,  Doniphan,  Neb 6  hnes  ^ 

freight  &  Duties 10  lines   *<J.  H.  McCabe,  716  47th  St 8  hnes 

•Interest  &  Discount 13  lines   v^-  E.  Austin 6  lines 

•Cash  Discount 8  lines    ^^otes  Payable 6  hnes 

^^arshaU  Field  &  Co.,  200  Adams  St 12  hnes 

^ohn  V.  Farwell  Co.,  148  Market  St 13  hnes 

y^.  B.  Claflin  Co.,  New  York 9  lines 

y^.  Perrin  &  Cie,  Grenoble,  France 6  lines 

•^ly  &  Walker,  St.  Louis,  Mo 6  lines 

-  ^eifridge  &  Co.,  London,  Eng 6  hnes  / 

•'  -Carson,  Pirie,  Scott  &  Co. ,  Adams  &  Franklin .  1 1  lines 

^ills  &  Gibb,  42  Madison  St 9  lines 

/^.  W.  Klemm,  Bloomington,  111 10  lines    _^has.  Rubens  &  Co.,  267  Frankhn  St 6  lines  y 

/fitrawbridge  &  Clothier,  Philadelphia,  Pa. ..11  lines     ^chraeder  &  Kramer,  Berhn,  Germany 5  lines 


/Expense 10  lines 

/Traveling  Expense 12  lines 

/Loss  &  Gain 13  lines 

/$^otes  Receivable 6  lines 

v«.  Nugent  &  Bros.,  St.  Louis,  Mo 10  lines 

yXjeo.  W.  Graham  Co.,  Crawfordsville,  Ind. .  10  hnes 

Aom  Smith,  Peoria,  111 10  lines 

•*Samstag  &  Hilder  Bros.,  New  York 10  lines 


A 


184  DRY  GOODS  BUSINESS 

TRANSACTIONS  FOR  AUGUST 

AUGUST  1,  19—, 

Jas.  H.  Morrison  and  Arthur  E.  Clark  became  equal  partners  in  the  wholesale  dry 
goods  business  at  147  Fifth  Ave.,  Chicago,  111.,  under  the  firm  name  Morrison  &  Clark. 
Each  invested  $12500.00.  Mr.  Clark's  investment  consisted  entirely  of  cash.  Mr.  Morri- 
son's investment  was  as  follows: 

Stock  of  Mdse  on  hand  $7684 .  50 

Furniture  &  Fixtures  782 .  50 

Accounts  receivable  frona  the  following: 

B.  Nugent  &  Bros.,  St.  Louis,  Mo.  1075.60 
'  •  Geo.  W.  Graham  Co.,  Crawfordsville,  Ind.  860.75 

Toga^Sm^th,  Peoria,  111.  750. 

.•     Samstag  &  Hilder  Bros.,  New  York  1273.87 

C.  W.  Klemm,  Bloomington,  III.  '  72 .  78 
,Make  the  original  entries  for  the  above  investments  and  post  at  once. 

j/    Bought  of  John  V.  Farwell  Co.,  148  Market  St.,  terms  2/10  n/60,  an  invoice  of 

goods  amounting  to  $270.00. 
^.-'■^  Record  this  in  the  purchase  book.    The  items  are  always  enumerated  on  the  invoice  itself,  which  is 
f  then  given  a  number  and  filed  for  record  and  future  reference.    Therefore  the  items  will  be  omitted  from 

the  purchase  book  entry. 
/ 

''Sold  to  Strawbridge  &  Clothier,  Philadelphia,  Pa.,  terms  2/10  1/30  n/60: 

1  pc.    Lonsdale  cambric  muslin,     56  yds.,  at  1O|0 

6  pes.  Utica  45-inch  bleached  musUn,     41,  42,  43,  41,  42 —    209  yds.  at  11|0 

4  pes.  Dependon  L  L  brown  sheeting,     50,  49  j,  50 J,  51  j —    201  yds.  at  5^)4 

6  pes.  Crown  cambric,    46,  44 1,  43 f,  52 ^  47 1,  50—  ***  yds.  at  4ft 

Use  a  very  condensed  style  of  writing,  and  small,  neat  figures,  in  making  this  and  subsequent  entries 

in  the  sales  book.    Give  each  item  one  line  only,  omitting  the  figures  which  denote  the  lengths  of  the 

different  pieces.     Then  write  these  figures  just  above  the  item,  making  them  very  small  and  neat. 

The  tendency  of  students,  and  in  fact  of  everybody  except  experienced  accountants,  is  to  write  a 
large,  sprawling  hand  which  is  unsuitable  for  bookkeeping,  in  which  it  is  often  necessary  to  write  a  great 
deal  in  a  small  space.  The  sales  book  entries  for  August  and  September  will  afford  you  excellent  practice 
to  the  end  of  acquiring  the  style  of  penmanship  you  need  for  bookkeeping  work.  Do  not  abbreviate, 
aside  from  the  use  of  well-known  and  customary  abbreviations. 

Pajd  rent  for  August  in  cash,  $125.00. 

AUGUST  8 

Engaged  Chas.  O.  Leonard  as  bookkeeper  and  stenographer,  at  a  salary  of  $25.00 
a  week,  beginning  this  morning. 

Make  a  memorandum  in  your  journal. 

Bought  of  the  H.  B.  Claflin  Co.,  New  York,  an  invoice  amounting  to  $568.25,  terms 
1/10  n/30.     The  invoice  was  dated  August  1. 

The' entry  in  the  purchase  book  must  be  dated  August  1. 

vPaid  freight  on  the  above  invoice,  $7.60.     Charge  Freight  &  Duties. 
iX^ught  of  Marshall  Field  &  Co.,  200  Adams  St.,  on  our  30-day  note  at  6%,  Mdse 
invoicing  at  $950.00  net.     (Two  entries,  purchase  book  and  journal.) 
j^^x^nsured  our  stock  of  Mdse  with  the  Phoenix  Insurance  Co.  of  Hartford,  Conn.    Face 
of  policy,  $6200.00.     Rate  for  1  year,  $1.20  per  hundred.     Paid  the  premium  in  cash. 


TRANSACTIONS   FOR  AUGUST 


185 


***  yds.  at 

70 

***  yds.  at 

50 

♦**  yds.  at 

10^0 

Sold  to  P.  B.  Palmer  &  Co.,  Lawrence,  Kan.,  terms  2/10  1/30  n/60: 

6  pes.  Falcon  percale,   28,  28§,  29,  28|,  28,  29J 

8  pes.  Simpson  Novelty  print,    56,  56f,  57,  56^  59,  58i,  57^,  57 

4  pes.  Lonsdale  cambric  muslin,   57,  58?,  56,  59 

Petty  cash  sales  for  the  day,  $34.50. 

^Sold  to  Blackman  Bros.  &  Co.,  Pullman,  Wash.,  terms  net  60  days: 

6  pes.  27-in.  White  India  linen,  24  yds.  each  ***  yds.  at 

10  pes.  32-in.  White  Persian  lawn,  24  yds.  each,  ***  yds.  at 

8  pes.  45-in.  White  French  lawn,  35  yds.  each,  ***  yds.  at 

Ask  your  teacher  to  assign  to  you  one  of  the  following  price  lists,  and  use  the  list  assigned  you  when- 
ever sales  are  made  of  any  of  the  articles  named  in  the  list. 


** 


Variable  Selling  Prices 


Article 

27-in.  White  India  linen 

32-in.  White  Persian  lawn 

45-in  White  French  lawn 

32-in.  Swiss  mull 

67-in.  French  organdie 

36-in.  Handkerchief  linen,  sheer 

Princess  longcloth 

Nainsook,  plain 


List  1 

List  2 

Lists 

List  4 

List  5 

List  6 

List  7 

List  8 

4i 

4f 

5 

5i 

5 

5i 

4f 

4i 

9 

10 

10^ 

11 

10^ 

10 

9i 

10^ 

12i 

15 

12^ 

15 

12^ 

15 

12^ 

12^ 

15 

17^ 

20 

15 

17^ 

20 

17^ 

15 

30 

31 

32 

33 

34 

35 

29 

30 

27^ 

30 

27i 

30 

32^ 

27i 

30 

27^ 

8 

9^ 

10 

9 

8 

Sh 

9 

8 

10 

11 

lU 

12^ 

12 

11 

10 

n 

List  9 


4i 
11 
10 
20 
31 
30 

8^ 
12 


LisTlO 

List 11 

List  12 

List 13 

List 14 

List  15 

List 16 

List 17 

5 

5i 

H 

4i 

4J 

5 

5J 

5^ 

9 

9^ 

10 

10| 

11 

9 

9^ 

10 

12i 

15 

10 

12^ 

15 

10 

11 

12 

15 

17^ 

20 

15 

17^ 

20 

15 

17^ 

30 

30 

29 

30 

31 

32 

33 

34 

30 

27^ 

28 

29 

30 

31 

32 

32^ 

9 

9 

9^ 

10 

8 

Sh 

9 

9^ 

12^ 

10 

12^ 

10 

m 

11 

10 

9 

List  18 


27-in.  White  India  linen 

32-in.  White  Persian  lawn 

45-in.  White  French  lawn 

32-in.  Swiss  mull 

67-in.  French  organdie 

36-in.  Handkerchief  linen,  sheer, 

Princess  longcloth 

Nainsook,  plain 


m 

15 
35 
30 
10 


27-in.  White  India  linen 

32-in.  White  Persian  lawn 

45-in.  White  French  lawn 

32-in.  Swiss  mull 

67-in.  French  organdie 

36-in.  Handkerchief  linen,  sheer, 

Princess  longcloth 

Nainsook,  plain 


List  19 

List20 

List21 

List22 

List23 

List24 

List25 

List26 

4f 

5 

5i 

5i 

41 

41 

5 

5i 

11 

9 

10 

11 

10 

9 

10 

11 

10 

12^ 

11 

12 

13 

14 

12 

10 

17^ 

15 

20 

17i 

15 

17^ 

20 

15 

29 

30 

31 

32 

33 

34 

35 

30 

27f 

30 

32| 

27^ 

30 

30 

27i 

32^ 

8 

9 

10 

8 

9 

10 

8 

9 

9 

10 

11 

12 

m 

8 

9 

10 

Part  of  the  goods  received  today  from  the  H.  B.  Claflin  Co.  were  not  as  ordered  and 
these  were  returned  to  them  for  credit,  $7.50. 

Make  an  entry  in  the  journal  debiting  the  H.  B.  Claflin  Co.,  and  crediting  Mdse  Purchases. 


186  DRY  GOODS  BUSINESS 

AuansT  6 

Bought  of  V.  Perrin  &  Cie,  Grenoble,  France,  an  invoice  of  gloves  amounting  to  550 
francs.     The  invoice  was  dated  July  22,  terms  2/30  n/60. 

In  changing  this  to  U.  S.  money  for  the  purpose  of  making  the  entry  on  our  books,  consider  1  franc 
as  20^.  This  is  approximately  correct,  and  you  have  no  way  of  knowing  exactly  what  exchange  on  Paris 
can  be  bought  for  when  the  final  settlement  is  made. 

-  Paid  freight  and  duties  on  the  above  in  cash.  The  freight  charges  amounted  to 
$2.25.     The  duty  was  $4.00  per  dozen  for  10  dozen  gloves. 

Charge  Freight  &  Duties  for  the  entire  amount  of  cash  paid  out. 

The  $4.00  per  dozen  charge  is  called  a  specific  duty.  It  is  based  on  quantity.  When  the  duty  is 
a  certain  per  cent  of  the  value,  it  is  called  an  ad  valorem  duty. 

Received  of  Samstag  &  Hilder  Bros.,  New  York,  their  check  in  settlement  of  two 
invoices  due  today,  as  follows:  One  invoice  dated  July  26,  $314.50  less  6%  for  cash  in 
ten  days;  one  invoice  dated  July  26,  $305.00  less  2%  for  cash  in  ten  days.  Amount  of 
check,  $594.53. 

Received  a  60-day  note  bearing  6%  interest,  from  Tom  Smith,  Peoria,  111.,  for  $750.00, 
to  cover  the  balance  due  on  his  account. 

Sold  to  J.  C.  Nichol,  Foley,  Minn.,  terms  1/10  n/30: 

12  gro.  Farwell  Brand  needles  at       1.05  **.** 

60  doz.  Klostersilk  floss  at         .30  **. 

16  doz.  Coats' spool  cotton  at  58^  9.28 

Less7%  .66  *.** 


AUaUST  6 

Engaged  R.  E.  Austin  as  traveling  salesman,  at  a  salary  of  $100.00  per  month  and 
expenses. 

Make  a  memorandum  of  this  in  the  journal. 

Bought  of  the  National  Trunk  Co.,  300  W.  Madison  St.,  City,  on  our  30-day  note  at 
'  6%,  two  trunks  for  the  use  of  Mr.  Austin.     The  trunks  cost  $25.00  and  $13.50. 

Charge  Traveling  Expense. 

Advanced  Mr.  Austin  $100.00  as  expense  money,  with  the  understanding  that  he 
was  to  keep  a  record  of  his  expenditures  and  submit  an  itemized  report  of  them  whenever 
called  upon  to  do  so. 

Charge  the  $100.00  to  R.  E.  Austin.  When  he  submits  reports  of  expenditures,  his  account  will 
be  credited  and  Traveling  Expenses  debited  with  the  amounts  reported  by  him  as  spent.  In  this  manner 
the  entire  $100.00  will  eventually  be  written  off  of  his  account  and  charged  into  the  Traveling  Expense 
account. 

Sold  to  the  Lawndale  Dry  Goods  Co.,  1579  Ogden  Ave.,  City,  terms  1/10  n/60: 

20  pes.  32-in.  Swiss  mull,  24  yds  each,  ***  yds  at  .** 

8  pes.  67-in.  French  organdie,  16|  yds  each,  ***  yds  at  .  ** 

8  pes.  36-in.  Handkerchief  linen,  sheer,  12  yds  each,  ***  yds  at  .  ** 

AUGUST  7 

Bought  of  Ely  &  Walker,  St.  Louis,  Mo.,  an  invoice  of  Mdse  amounting  to  $354.50, 
terms  6/10  5/30  4/60.     The  invoice  was  dated  August  4. 

Paid  freight  on  the  above,  $6.35.  i 


TRANSACTIONS  FOR  AUGUST  187 

Received  a  bill  from  The  A.  H.  Andrews  Co.,  156  Wabash  Ave.,  for  office  furniture, 
$69.50.     Paid  the  bill  at  once  by  check. 

No  account  is  kept  with  the  A.  H.  Andrews  Co.  Charge  the  Furniture  &  Fixtures  account  direct 
in  the  cash  book. 

Received  Geo.  W.  Graham  Co.'s  15-day  note  at  6%  for  $860.75,  the  amount  of  the 
balance  due  on  their  account. 

The  Lawndale  Dry  Goods  Co.  returned  10  pes.  32-in.  Swiss  mull  sold  to  them  yesterday, 
claiming  that  their  order  was  for  10  pes.  only,  instead  of  20  pes.  as  billed.  Gave  them  a 
credit  memo  for  the  10  pes.  returned. 

Enter  in  journal,  debiting  Mdse  Sales. 

Subscribed  to  the  Dry  Goods  Reporter  for  one  year,  paying  the  subscription  price 
in  cash,  $5.00. 

Sold  to  Haskett  &  Co.,  579  Madison  St.,  City,  terms  2/10  1/30  n/60: 

4  pes.  Imperial  chambray,   53,  54|,  52,  53 —  ***  yds  at       lljlf 
6  pes.  Gibraltar  percale,  29,  30^,  31,  30i,  29f,  30—  ***  yds  at      61^ 

5  pes.  Berkeley  300  cambric  musUn,  44,  44J,  43f,  42^  43i—  ***  yds  at      20)4 


AUanST  8 

Sold  to  Samstag  &  Hilder  Bros.,  New  York,  terms  6/10  5/30  4/60: 

10  pes.  27-in  Adora  silk,  25^  26J,  24f ,  25,  26|,  24^,  26,  24,  25^,  26    ***  yds  at  280 

432  pes.  K  3632-1  Featherstitch  braid,     per  doz.  pieces  750 

432  pes.  K  3631-1,    do.     at  850 

Remitted  to  H.  B.  Claflin  Co.  our  check  in  settlement  of  the  invoice  received  from 
them  on  August  3,  dated  August  1,  less  1%  discount. 

\  Look  this  up  in  the  purchase  books  and  journal.    Discount  only  the  net  amount  of  goods  kept  by  us. 
'The  remittance  was  made  two  days  ahead  of  time  to  allow  for  the  time  consumed  in  sending  the 
check  from  Chicago  to  New  York. 

Received  C.  W.  Klemm's  check  in  settlement  of  an  invoice  sold  him  on  July  30. 
The  amount  of  the  invoice  was  $72.78;  terms  2/10  n/30.    The  amount  of  the  check  was 
$71.47,  the  extra  15^  being  included  to  cover  exchange. 
-See.  tcaixsaction  dated  Jime  5,  page  152. 

Paid  Chas.  0.  Leonard's  salary  for  the  week  in  cash,  $25.00. 

Post  your  books  to  date  in  the  following  order :  Journal,  Sales  Book,  Purchase  Book, 
Cash  Book.    Do  not  take  a  trial  balance.    Rule  up  any  personal  accounts  that  balance. 

AUOUST  11 

Bought  of  Selfridge  &  Co.,  London,  England,  an  invoice  of  woolens  amounting  to 
£120.    The  invoice  was  dated  August  4,  terms  2/30,  n/60. 

In  entering  this  item,  change  English  pounds  to  U.  S.  dollars  by  multiplying  by  4.90.  You  have 
no  way  of  knowing  what  London  exchange  will  be  when  the  bill  is  settled,  but  $4.90  is  approximately 
correct. 

_^_    The  freight  and  duty  on  the  above  amounted  to  $137.65,  which  we  paid  in  cash. 

We  deposited  the  check  received  yesterday  from  C.  W.  Klemm  and  were  charged 
15^  exchange. 


188  DRY  GOODS  BUSINESS 

Gave  our  check  to  John  V.  Farwell  Co.  for  the  net  amount  of  the  invoice  purchased 
of  them  on  August  1. 

Received  New  York  exchange  from  Strawbridge  &  Clothier  in  settlement  of  the 
invoice  sold  them  on  August  1. 

Jteek  this  up  in  the  sales  book. 

Petty  cash  sales  for  the  day,  $10.75. 

AUGUST  13 

Bought  two  invoices  of  Carson,  Pirie,  Scott  &  Co.,  Cor.  Adams  &  Franklin  Sts.,  both 
dated  August  13.  One  was  for  lace  curtains,  $176.70,  terms  6/10  5/30  4/60.  One  was 
for  domestics,  $110.50,  terms  2/10  1/30  n/60.    (Make  two  entries  in  the  purchase  book.) 

A  peculiar  feature  of  the  terms  on  the  first  bill  is  that  no  discount  less  than  4%  is  offered,  and  that 
the  customer  does  not  get  an  extension  of  time  for  a  payment  of  the  full  amount  of  the  bill.  If  he  fails 
to  take  his  4%  at  the  expiration  of  the  60-day  period,  he  must  pay  the  full  price,  and  in  most  cases  interest 
would  be  charged  up  to  him  from  the  61st  day. 

Received  a  check  from  P.  B.  Palmer  &  Co.,  for  the  net  amount  due  for  Mdse  sold 
them  on  August  3. 

On  August  1  the  balance  due  from  B.  Nugent  &  Bros.,  St.  Louis,  Mo.,  was  $1075.60. 
Received  their  60-day  note  at  6%  dated  June  25,  for  the  entire  amount. 

Remitted  to  Ely  &  Walker  net  cash  for  their  invoice  dated  August  4  (See  transac- 
tion on  August  7). 

Received  J.  C.  Nichol's  check  for  our  invoice  of  August  5,  less  1%. 

Jas.  H.  Morrison  withdrew  $45.00  for  his  personal  use. 

AUGUST  15 

/©ought  of  Mills  &  Gibb,  42  Madison  St.,  City,  an  invoice  of  cotton  and  silk  thread, 

bmtons,  and  lace  trimmings  amounting  to  $175.00.     Terms,   6/10    5/30    4/60. 

y        Remitted  to  V.  Perrin  &  Cie,  Paris  exchange  for  550  francs  less  2%.    The  rate  of 

\)r     exchange  was  5.15  (5'Vioo  francs  to  the  dollar).    This  was  for  the  invoice  received  on  the 

5th  inst.,  dated  July  22.    Our  remittance  was  sent  six  days  early  as  we  wished  it  to  reach 

them  in  time  to  entitle  us  to  the  discount. 

To  ascertain  the  cost  of  the  draft  on  Paris,  first  deduct  2%  from  the  550  francs.  This  gives  539 
francs  as  the  net  amount.  Divide  by  5.15,  the  current  rate  of  exchange.  The  result  will  be  the  net  cost 
to  us,  expressed  in  U.  S.  money,  and  will  be  entered  in  the  General  column.  The  difference  between  this 
amount  and  the  $110.00  already  entered  on  our  books,  will  be  entered  as  cash  discount. 

It  should  be  noted  that  the  cash  discount  entered  as  above  is  not  all  cash  discount.  The  result 
secured  ($5.84)  includes  the  amount  of  the  actual  cash  discount  (11  francs  or  $2.14)  and  $3.20,  the  amount 
of  the  discrepancy  in  our  first  entry. 

Received  Samstag  &  Hilder  Bros.'  check  in  settlement  of  an  invoice  amounting  to 
$654.37  sold  them  on  July  17  on  the  following  terms:  6/10  5/30  4/60.  Amount  of  check, 
$621.65.  J 

Received  Haskett  &  Co.'s  check  for  our  invoice  of  August  7,  less  2%. 

Paid  Chas.  O.  Leonard's  salary  for  the  week  in  cash. 

Post  your  books.  Take  a  trial  balance,  which  must  include  the  unposted  lead  pencil 
footings  from  the  sales  book,  purchase  book,  and  special  columns  in  the  cash  book,  and 
the  cash  balance.  In  determining  the  amount  of  the  cash  balance,  take  into  consideration 
the  totals  of  the  Petty  Cash  Sales  and  Expense  columns.  Make  no  statements.  Close 
any  personal  accounts  that  balance. 


TRANSACTIONS   FOR   AUGUST  189 

AUGUST  17 

Sold  to  Blackman  Bros.  &  Co.,  Pullman,  Wash.,  terms  net  60  days: 

10  pes.  Princess  longcloth,  12  yds.  each,  ***  yds.  at    .  ** 

12  pes.  Nainsook,  plain,  24  yards,  each,  ***  yds.  at    .  ** 

Sold  to  B.  Nugent  &  Bros.,  St.  Louis,  Mo.,  terms  net  60  days: 

6  pes.  27-in.  \Miite  India  linen,  24  yds.  each,  ***  yds.  at    .  ** 

8  pes.  32-in.  White  Persian  lawn,  24  yds.  each,  ***  yds.  at 


** 


AUGUST  18 

Bought  of  Carson,  Pirie,  Scott  &  Co.  an  invoice  of  corsets  amounting  to  $137.25. 
Terms  1/10  n/30. 

Received  a  check  from  Samstag  &  Hilder  Bros,  in  payment  of  our  invoice  of  August 
8,  less  6%. 

Sold  to  Strawbridge  &  Clothier,  Philadelphia,  terms  2/10  1/30  n/60: 

7  pes.  Fruit  of  the  Loom  cambric  muslin,  56,  58,  57^,  56J,  58j,  57,  58 — •    ***  yds.  at   11^ 

8  pes.  Wamsutta  cambric  muslin,  57j,  59,  56,  58j,  57,  561,  59,  60§ — •        ***  yds.  at   11^ 
134  rolls  White  Rose  cotton  batts  (12  oz.) —        at  150 

Sold  to  Geo.  W.  Graham  Co.,  Crawfordsville,  Ind.,  terms  6/10  5/30  4/60: 
12  doz.  Ladies'  long  "Dependon"  mocha  gloves,  at  $24.00  ***. 

Less  25%  **.       $*♦*. 

6  doz.  Ladies'  American  Taffeta  umbrellas,  at  $12.00  *♦ .  ** 

5  doz.  No.  484  40-inch  shawls,  wool  squares,  at  $10.50  **.** 

$♦**.** 

Returned  to  Carson,  Pirie,  Scott  &  Co.,  as  not  up  to  sample,  goods  received  today 
invoiced  at  $9.75. 

Make  an  entry  in  the  journal  as  on  Aug.  3. 


Petty  cash  sales  for  the  day,  $18.90. 


\ 


AUGUST  SO 


Bought  from  John  V.  Farwell  Co.  an  invoice  of  toweling  amounting  to  $164.50. 
Tmi^s,  2/10  1/30  n/60. 

Sold  to  Tom  Smith,  Peoria,  111.,  terms  2/10  1/30  n/60: 

20  pes.  Imperial  F.  unbleached  bunting,  944  yds.  at     Z\^ 

6  pes.  Amoskeag  denim,  45,  47|,  45^,  46f,  47,  45| —  ***  yds.  at     130 

7  pes.  Washington  prints,  turkey  red,  49i,  50,  49,  49,  50f,  49i,  50—     ***  yds.  at     4|0 

Sold  to  Haskett  &  Co.,  579  W.  Madison  St.,  City,  terms  1/30  n/60: 

18  prs.  50  X  72  White  cotton  blankets,        at  750 

24  prs.  64  x  76  Gray  cotton  blankets,         at  92^0 

12  doz.  18  X  39  Unbleached  Turkish  towels,         at  700 

6  pes.  Amoskeag  denim,  45,  47^,  49,  46,  47,  46 —  ***  yds.  at     130 

AUGUST  22 

Received  a  shipment  of  Mdse  from  the  H.  B.  Claflin  Co.,  New  York.    The  invoice 
amounted  to  $537.86.     Terms  1/30  n/60.     The  bill  was  dated  August  18. 
Paid  $6.57  for  freight  and  drayage  on  the  above  shipment. 


190  DRY   GOODS   BUSINESS 

Sold  to  the  Lawndale  Dry  Goods  Co.,  1579  Ogden  Ave.,  City,  terms  1/10  n/30: 

6  pes.  Lonsdale  cambric  muslin,    56,  57j,  57,  58f,  57,  56 —  ***  yds.  at  lOj)^ 

2  pes.  Pequot  10-4  sheeting,  brown,     50,  495 —  **  yds.  at  26^ 

3  pes.  Pequot  10-4  sheeting,  bleached,     51,  49|,  49—  ***  yds.  at  2S^ 
1  pc.   32-in.  Swiss  mull,      24  yds.  at  _♦* 

Geo.  W.  Graham  &  Co.'s  note  in  our  favor  fell  due  today  and  was  paid  by  check  with 
accrued  interest.  The  check  was  drawn  upon  a  Chicago  bank,  hence  there  was  no  ex- 
change included. 

Many  large  retail  houses  throughout  the  central  states  which  buy  extensively  from  wholesale  and 
jobbing  houses  in  Chicago,  carry  accounts  in  Chicago  banks  in  order  to  avoid  the  necessity  of  including 
exchange  on  checks  sent  to  Chicago. 

Bought  gloves  of  Marshall  Field  &  Co.  amounting  to  $300.00.  Two  invoices  were 
received:    One  for  $190.00  less  6/10  5/30  4/60,  and  one  for  $110.00  less  2/10   1/30. 

Paid  by  check  both  of  Carson,  Pirie,  Scott  &  Co.'s  invoices  of  August  13,  less  dis- 
counts allowed. 

Paid  Mr.  Leonard's  salary  in  cash. 

Strawbridge  &  Clothier  returned  1  pc.  Fruit  of  the  Loom  cambric  musUn,  58  yds., 
as  defective,  and  we  allowed  them  credit  for  it  at  invoice  price. 

Post  your  books,  but  do  not  take  a  trial  balance. 

AUGUST  24 

Received  B.  Nugent  &  Bros.'  check  for  the  amount  of  their  note  in  our  favor,  due 
today  with  accrued  interest. 

Paid  Mills  &  Gibb  for  their  invoice  of  Aug.  15  less  discount  allowed  by  the  terms 
of  the  purchase.  / 

AUOUST  26 

Bought  of  Marshall  Field  &  Co.  an  invoice  of  handkerchiefs  amounting  to  $125.00. 
Terms  6/10  5/30  4/60. 

Sold  to  B.  Nugent  &  Bros.,  St.  Louis,  Mo.,  terms  2/10  n/30: 

100  doz.  Klostersilk  floss,     at  300  **. 

40  doz.  Coats'  Spool  Cotton,     at  500  **  ** 

Less  7% 

40  gro.  Upholstery  tacks,     at  2.10 
Less  90% 


and  less  10% 


*.** 

**** 

*♦ 

Sold  to  Haskett  &  Co.,  579  W.  Madison  St.,  City,  terms  2/10  1/30  n/60: 

2  pes.  Lonsdale  cambric  muslin,     56,  58^ —  ***  yds.  at     lOf^ 

4  pes.  Utica  45-in.  bleached  musUn,     42,  43 i  43,  42—  ***  yds.  at     lU^ 

2  pes.  Dependon  LL  brown  sheeting,     50,  49  § —  **  yds.  at    05  J j^ 

4  pes.  Crown  cambric,     44|,  45i,  43f,  50 — ■  '  ***  yds.  at    04  ^ 


TRANSACTIONS   FOR  AUGUST  191 

AuansT  28 

Received  a  check  from  Strawbridge  &  Clothier  for  the  amount  due  on  our  invoice 
dated  August  18. 

The  Geo.  W.  Graham  Co.  paid  by  check  the  amount  due  today  on  the  invoice  sold 
them  on  the  18th  inst. 

Paid  in  cash  the  invoice  bought  of  Carson,  Pu-ie,  Scott  &  Co.  August  18,  less  dis- 
count allowed.  Remember  that  the  discount  is  figured  only  on  the  amount  due  for  goods 
kept  by  us. 

Sold  to  C.  W.  Klemm,  Bloommgton,  111.,  terms  1/30  n/60: 

10  pes.  Falcon  percale,    28,  29|,  29,  28|,  27,  28^  28,  30,  29i,  28J—  ***  yds.  at    7^ 
6  pes.  Simpson  Novelty  prints,     56,  58 J,  57,  575,  58,  59 —  ***  yds.  at    6fS 

Sold  Mdse  to  Chas.  O.  Leonard,  the  bookkeeper,  for  cash  at  cost,  $17.65. 
This  is  a  petty  cash  sale. 

Haskett  &  Co.,  clauning  overcharge,  asked  for  a  rebate  of  $2.00  on  our  bill  of  Aug. 
26,  and  we  allowed  this. 

AUOUST  S9 

Received  an  express  money  order  from  Tom  Smith,  Peoria,  111.,  in  settlement  for 
the  Mdse  billed  him  on  the  20th  inst.  less  2%  discount. 

Arthur  E.  Clark  withdrew  $40.00  cash. 

R.  E.  Austin,  traveling  salesman,  returned  today  from  his  first  trip  for  the  house. 
He  submitted  a  statement  of  expenses  amounting  to  $76.60. 

Debit  Traveling  Expense  and  credit  R.  E.  Austin's  account  for  $76.60  (Journal  entry). 

Paid  John  V.  Farwell  Co.  the  amoimt  due  on  their  invoice  of  August  20,  less  cash 
discount. 

Paid  Mr.  Leonard's  salary  for  the  week  in  cash. 

^,^  AUGUST  SI 

Paid  R.  E.  Austin's  salary  from  August  6  to  date  in  cash,  $80.65.  (Charge  Travel- 
ing Expense.) 

Post  your  books.  The  footings  of  the  sales  book,  purchase  book,  and  cash  book 
must  be  posted  at  this  time,  and  those  books  ruled  up.  The  Petty  Cash  Sales  Colunm 
in  the  cash  book  must  be  posted  to  the  Sales  Book  before  the  sales  book  total  is  posted. 

Take  a  trial  balance,  which  must  include  the  balance  of  the  cash  book. 

Make  statements,  using  the  following  inventories: 

Merchandise  11625.60 

Furniture  &  Fixtures  850.00 

Interest  on  Tom  Smith's  note  in  our  favor 


«  **  *f* ' 


Interest  on  our  note  favor  Marshall  Field  &  Co.  *.**  ^    -^^ 

Interest  on  our  note  favor  National  Trunk  Co.  .**  yw  -^  -,  —  ^.-v  o 

Insurance  paid  for  and  unused,  11  mo.     {Expense  Invty)  **.** 

Trunks  (Traveling  Expense  In\'ty)  35.00 

Salary  earned  and  unpaid  (Chas.  O.  Leonard,  1  day)  3.57 

You  will  have  to  determine  from  the  nature  of  the  above  inventories  whether  they  are  resources 
or  Uabilities. 


192  DRY   GOODS   BUSINESS 

In  making  the  loss  and  gain  statement,  show  Freight  &  Duties  as  an  increase  oi  the 
cost  of  Mdse,  and  in  closing  the  ledger,  close  Freight  &  Duties  into  Mdse  before  closing 
the  latter  account.  Also  show  Traveling  Expense  in  the  loss  and  gain  statement  as  an 
increase  of  the  loss  on  Expense,  and  in  closing  the  ledger,  close  Traveling  Expense  into 
Expense  before  closing  the  latter  account. 

Close  Loss  <fe  Gain  with  two  red  ink  entries,  showing  the  profit  as  equally  divided 
between  the  partners.  Close  the  proprietors'  accounts,  but  close  no  other  financial 
accounts  except  personal  accounts  which  balance. 

Partnership  Problems. 

1.  F.  E.  Farrell  and  Geo.  H.  Ritchie  began  business  as  partners  on  January  1,  1913,  with  invest- 
ments as  follows:  Farrel,  $4473.25;  Ritchie,  $3276.84.  Their  agreement  was  to  divide  profits  equally. 
The  profits  for  the  first  year  amounted  to  $5246.84.  On  December  31,  1913,  Ritchie  retired  from  the 
business,  in  consideration  of  a  payment  of  $5000.00  in  cash  made  to  him  personally  by  Farrell.  What 
entry  or  entries  in  the  books  of  the  business  were  necessary? 

2.  George  B.  Duncan  and  H.  E.  Evans,  both  printers,  united  their  plants  on  January  1,  1913, 
under  the  firm  name  of  Duncan  and  Evans,  with  an  agreement  that  profits  were  to  be  divided  equally 
between  them.  Mr.  Duncan  brought  into  the  firm  the  following  assets  and  liabilities:  Cash,  $1250.00; 
accounts  receivable,  $1375.20;  notes  receivable,  $72.50  with  interest  at  6%  since  April  1,  1912;  printing 
machinery  and  equipment,  $2346.50;  accounts  payable,  $425.69;  notes  payable,  $1000.00  with  interest 
at  4%  since  December  1,  1912.  Mr.  Evans  brought  into  the  partnership  notes  receivable,  $260.25,  with 
interest  at  5%  since  Sept.  1,  1912*  accounts  receivable,  $63.50;  printing  machinery  and  equipment  worth 
$1725.62;  stock  of  paper,  $574.83;  accounts  payable,  $500.00;  notes  payable,  $650.00,  with  interest  at 
41%  since  October  1,  1912.  If  the  net  profit  for  1913  was  $5762.50,  what  were  the  investments  of  the 
partners  on  December  31,  1913,  no  money  having  been  withdrawn  by  either? 

3.  The  investments  of  Geo.  B.  Duncan  and  H.  E.  Evans  on  January  1,  1914,  were  the  same  as 
on  December  31,  1913,  as  determined  in  the  last  problem.  On  April  1,  1914,  each  partner  withdrew 
$1000.00  in  cash  from  the  business.  On  September  1,  1914,  H.  E.  Evans  withdrew  $2000.00  in  cash. 
The  net  profit  for  the  year  was  $5264.28.  On  December  31,  1914,  H.  E.  Evans  withdrew  from  the  part- 
nership, the  consideration  being  $5000.00  paid  to  him  by  Geo.  B.  Duncan  personally.  What  entry  or 
entries  should  the  bookkeeper  make  on  December  31,  1914,  to  show  the  dissolution?  What  is  the  amount 
of  Geo.  B.  Duncan's  net  investment  at  the  beginning  of  the  new  year? 

4.  J.  W.  Shaw  and  Henry  E.  Field  were  partners  with  investments  of  $12560.00  and  $11248.26 
respectively  on  February  28,  1913,  on  which  day  Shaw  retired  from  the  partnership,  being  paid  $12560.00 
in  cash  out  of  the  funds  of  the  business.  What  entry  or  entries  in  the  books  of  the  business  were  neces- 
sary? 

5.  Paul  Peters  and  W.  L.  Ryan  dissolved  partnership  on  May  1,  1913,  their  respective  invest- 
ments at  the  time  being  $7428.39  and  $5892.73.  Mr.  Peters  accepted  $7000.00  for  his  interest  in  the 
business,  and  this  sum  was  paid  in  cash  out  of  the  funds  of  the  business.  What  entry  or  entries  in  the 
books  of  the  business  were  necessary? 

6.  E.  E.  Morrill  and  A.  H.  Ashley,  partners,  had  investments  of  $12728.95  and  $13842.96  respect- 
ively on  July  1,  1914.  Morrill  offered  Ashley  $16000.00  for  his  interest  in  the  business  and  Ashley  ac- 
cepted. Ashley  took  in  payment  the  building  occupied  by  the  business,  at  $12000.00,  the  amount  at 
which  it  was  carried  in  the  ledger,  and  $4000.00  in  cash  from  the  funds  of  the  business.  What  entry  or 
entries  in  the  books  of  the  business  were  necessary? 

7.  J.  A.  Long  engaged  in  the  dry  goods  business  on  January  1,  1913,  investing  $8000.00  cash. 
His  profit  for  the  first  year  was  $3500.00,  which  he  allowed  to  remain  in  the  business.  On  January  1, 
1914,  he  took  in  as  partner  E.  C.  Dolan,  transferring  to  him  a  one-fom-th  interest  in  the  business  in  con- 
sideration of  $4000.00  cash,  the  cash  being  paid  to  Mr.  Long  personally  by  Mr.  Dolan  without  increas- 
ing the  capital  of  the  business.    What  entry  or  entries  in  the  books  of  the  business  were  necessary? 


TRANSACTIONS   FOR   SEPTEMBER  193 

8.  On  July  1,  1913,  E.  A.  Cameron  was  sole  proprietor  of  a  business  the  capital  of  which,  as  shown 
by  the  capital  account,  was  $6342.96.  He  received  C.  E.  Carpenter  as  an  equal  partner  at  that  time 
upon  condition  that  Carpenter  should  pay  $8000.00  into  the  business  in  cash.  Only  one  capital  account 
was  to  be  kept.    What  entry  was  necessary? 

9.  A.  M.  Adams  engaged  in  business  on  January  1,  1913,  with  a  cash  investment  of  $4000.00. 
During  January  the  net  loss  of  the  business  was  $190.50.  On  January  31  the  books  showed  that  Adams 
owed  Charles  E.  Rogers  $1500.00  on  account  and  that  Rogers  also  held  Adams'  note  for  $1000.00  without 
interest.  On  February  1,  Adams  took  in  Rogers  as  an  equal  partner  on  condition  that  Rogers  should  pay 
in  in  cash  an  amoimt  sufficient  to  make  the  investments  of  the  two  partners  equal.  What  entry  or  entries 
in  the  books  of  the  business  were  necessary? 

10.  B.  J.  Arnold  and  W.  R.  Higgins  became  partners  on  July  1,  1913,  imder  an  agreement  to 
divide  profits  in  proportion  to  investments.  B.  J.  Arnold  invested  cash,  $1726.82;  merchandise,  $5246.80; 
and  furniture,  $920.65.  W.  R.  Higgins  invested  cash,  $10000.00.  No  personal  accounts  or  notes  either 
payable  or  receivable  were  invested  by  either  partner.  The  cash  receipts  during  the  first  year  amounted 
to  $22542.60,  of  which  $7569.27  was  from  cash  sales  and  the  rest  on  personal  accounts  opened  during 
the  year.  The  cash  disbursements  during  the  year  amounted  to  $24526.00,  of  which  $5542.60  was  for 
expense  and  the  rest  for  merchandise.  On  June  30,  1914,  the  accounts  receivable  (all  new  merchandise 
sales  accounts)  amounted  to  $825.43,  the  accounts  payable  (all  new  merchandise  purchases  accounts) 
amounted  to  $1264.75,  and  the  inventories  were  as  follows:  Merchandise,  $15469.27;  furniture  and 
fixtures,  $900.00.  From  the  foregoing  facts  determine:  (1)  The  cash  balance  at  the  end  of  the  year; 
(2)  the  merchandise  purchases  for  the  year;  (3)  the  merchandise  sales  for  the  year;  (4)  the  profit  on  mer- 
chandise for  the  year;  (5)  the  net  profit  of  the  business  for  the  year;  (6)  the  net  worth  of  the  business 
on  June  30,  1914,  determined  in  two  ways;  (7)  the  investment  of  each  partner  on  July  1,  1914,  neither 
having  withdrawn  any  money  from  the  business. 

11.  On  July  1,  1914,  the  investments  of  Arnold  and  Higgins  were  as  determined  in  the  preceding 
problem.  The  profit  of  the  business  for  the  second  year  was  $4327.60.  On  June  30,  1915,  Mr.  Higgins 
retired  from  the  partnership,  receiving  the  amount  of  his  investment  in  cash  from  the  business.  TVTiat 
entry  should  the  bookkeeper  make? 

12.  A,  B,  and  C  are  partners  whose  investments  are  respectively  25,  35,  and  40%  of  the  total  in- 
vestment. Gains  are  divided  or  losses  borne  by  the  partners  in  the  proportions  which  their  investments 
bear  to  each  other.  The  following  trial  balance  shows  all  items  in  the  ledger  before  closing  except  the 
balances  of  the  partners'  accounts.  (1)  Ascertain  and  insert  these  balances.  (2)  Determine  the  amount 
of  the  gain  or  loss  since  the  books  were  last  closed,  using  the  following  inventories:  Real  Estate, 
$16450.00;  Mdse.,  $12500.00;  Salaries  due  clerks,  $23.75;  Interest  receivable,  $5.20;  Interest  payable, 
$2.37.     (3)  Prepare  a  trial  balance  showing  the  condition  of  the  ledger  after  closing. 

Cash  2346.50 

Real  Estate  16500.00 

Mdse  14230.75              2475.00 

Expense  275.00 

Interest  24.50                 37.75 

Notes  &  Accts.  Rec.  2532.60 

Notes  &  Accts.  Pay.  1475.00 


TRANSACTIONS  FOR  SEPTEMBER 
DBT  GOODS  BUSINESS — CONTINUED 
SEPTSMBEB  1 

Arthur  E.  Clark  retired  from  the  business,  transferring  his  entire  interest  to  Jas. 
H.  Morrison  for  S13,500.(X)  paid  to  him  by  Mr.  Morrison  out  of  private  funds. 

Purchased  6  trucks  from  The  Standard  Scale  &  Supply  Co.,  52  S.  Canal  St.,  at  $4.50 
each.    Gave  them  our  10-day  note  at  6%  for  the  amount  due. 


194  DRY   GOODS   BUSINESS 

We  have  no  reason  for  keeping  an  account  with  this  supply  company.  Handle  this  transaction 
entirely  through  the  journal,  debiting  Furniture  &  Fixtures. 

Paid  Marshall  Field  &  Co.  for  one  invoice  dated  August  22.  Two  invoices  were 
received  on  that  date;  we  paid  today  the  one  on  which  the  larger  discount  was  allowed. 

Advanced  R.  E.  Austin  $75.00  in  cash  and  started  him  out  on  his  second  business 
trip. 

Sold  to  Blackman  Bros.  &  Co.,  Pullman,  Wash.,  terms  1/10  n/30: 

4  pes.  Lonsdale  cambric  muslin,     63,  55|,  56j,  54 —  ***  yds.  at  10^^ 

6  pes.  45-in.  White  French  lawn,  35  yds.  each,  ***  yds.  at  .** 

4  pes.  67-in.  French  organdie,  16f  yds.  each,  ***  yds.  at  .** 

Paid  the  rent  for  September  in  cash,  $125.00. 

SEPTEMBER  2 

Bought  of  Mills  &  Gibb  Mdse  amounting  to  $145.25,  terms  2/10  1/30  n/60.  Upon 
receipt  of  the  goods  we  found  one  lot  slightly  damaged  and  wrote  advising  them  of  the 
condition  in  which  the  shipment  was  received. 

Remitted  to  Self  ridge  &  Co.  London  exchange  at  4.91 1  for  the  invoice  received 
August  11,  dated  August  4,  £120  less  2%. 

Refer  to  the  second  transaction  on  August  15  for  an  explanation  of  this  entry. 

Redeemed  our  note  issued  on  August  3  in  favor  of  Marshall  Field  &  Co.,  with 
interest  accrued  to  date  in  cash. 

Sold  to  Haskett  &  Co.,  579  W.  Madison  St.,  City,  terms  net  30  days: 
r  4  pes.  Falcon  percale,     29, 28|,  30^,  28f—  *♦*  yds.  at        70 

/  10  pes.  36-in.  Handkerchief  linen,  sheer,     12  yds.  each,  ***  yds.  at       .** 

I.  8  pes.  32-in.  Swiss  Mull,    24  yds.  each,  ***  yds.  at       .** 

SEPTEMBER  4 

Received  a  shipment  of  Mdse  from  Ely  &  Walker,  St.  Louis,  Mo.,  amounting  to 
$265.40.    The  invoice  was  dated  Sept.  1.    Terms,  net  10  days. 

Paid  the  freight  charges  on  the  above  shipment  in  cash,  $5.42. 

Discounted  at  the  bank  the  60-day  note  received  from  Tom  Smith  on  August  5. 
The  bank  charged  for  discounting  it  at  the  rate  of  4%  per  annum. 

Make  two  entries  on  the  debit  side  of  the  cash  book,  one  for  Notes  Receivable,  and  one  for  Interest 
&  Discount,  the  latter  being  the  net  amount  received  in  excess  of  the  face  of  the  note. 

Sold  to  Strawbridge  &  Clothier,  Philadelphia,  Pa.,  terms  2/10  1/30  n/60: 

6  pes.  Dependon  LL  brown  sheeting,  50,  49§,  51,  501,  49,  50 —    ***  yds.  at      b\t 
10  pes.  Crown  cambric,  44^,  43f,  52,  50,  52^,  51,  50,  50|,  49|,  46—***  yds.  at      4^ 
20  gro.  Farwell  Brand  needles,  at  $1.05 

SEPTEMBER  6 

Gave  the  National  Trunk  Co.  our  check  for  our  note  in  their  favor  dated  August  6, 
and  accrued  interest. 

Paid  Marshall  Field  &  Co.,  cash  in  settlement  of  their  invoice  of  August  26,  less 
discount. 

Petty  cash  sales  for  the  day,  $7.95. 


TRANSACTIONS   FOR   SEPTEMBER  195 

Bought  of  Chas.  Rubens  &  Co.,  267  Franklin  St.,  an  invoice  of  buttons,  $150.00 
less  10%.    Terms  2/10  1/30  n/60. 

Received  an  invoice  of  laces  and  embroidery  from  Schraeder  &  Kramer,  Berlin, 
Germany,  amounting  to  860  marks.    The  invoice  was  dated  August  28,  terms  2/30  n/60. 

A  mark  is  worth  approximately  24^.     (See  the  first  transaction  on  August  5.) 

Paid  freight  and  duty  on  the  above  in  cash.  The  freight  amounted  to  S4.60.  The 
duty  was  60%  ad  valorem.  (The  duty  was  paid  at  the  exchange  rate  of  96/  for  1  Reichs- 
mark,  or  4  marks.) 

Paid  Chas.  O.  Leonard's  salary  in  cash,  $25.00. 

Received  a  letter  from  Mills  &  Gibb,  containing  a  credit  memorandum  for  $6.50 
as  an  allowance  for  damages  to  goods  received  by  us  on  Sept.  2. 

Strawbridge  &  Clothier  returned  to  us,  as  soiled,  two  pes.  Crown  cambric,  49^  and 
50j  yds.,  and  we  gave  them  credit  for  the  goods  at  invoice  price. 

Post  your  books. 

SEPTEMBER  9 

Bought  of  Carson,  Pirie,  Scott  &  Co.  an  invoice  of  domestics  amounting  to  $164.20, 
terms  2/10  1/30  n/60. 

Sold  to  C.  A.  Ross,  Doniphan,  Neb.,  terms  6/10  5/30  4/60: 

4  pes.  Berkeley  300  cambric  muslin,     46,  4A\,  45,  43| —  ***  yds.  at      200 

4  pes.  6-in.  Androscoggin  pillow  tubing,     41,  40$,  39,  40J —         ***  yds.  at       140 

Sold  to  J.  H.  McCabe,  716  47th  St.,  City,  terms  2/10  n/30: 

6  pes.  Pequot  10-4  sheeting,  brown,     40,  4U,  41,  40J,  46i  44—***  yds.  at  260 

5  pes.  Dwight  Anchor  9-4  sheeting,  bleached,  41,  40|,  42,  39i,  41  f***  yds.  at  240 
4  pes.  Amoskeag  XX  ticking,    33,  34,  34f,  35 —                            ♦**  yds.  at  130 

Returned  to  Carson,  Pirie,  Scott  &  Co.  Mdse  amounting  to  $21.50. 

SEPTEMBEB  11 

Remitted  Chicago  exchange  to  Ely  &  Walker,  St.  Louis,  Mo.,  for  the  net  amount 
of  the  invoice  from  them  on  the  4th  inst.,  dated  Sept.  1. 

Paid  our  note  issued  on  Sept.  1  in  favor  of  the  Standard  Scale  &  Supply  Co.,  and 
accrued  interest,  by  check. 

Sold  to  Haskett  &  Co.,  terms  2/10  1/30  n/60: 

4  pes.  Imperial  chambray,     51,  53 i,  54,  52^ —  ♦**  yds.  at       110 

4  pes.  Berkeley  300  musUn  cambric,     44^,  43i,  42|,  43—  ***  yds.  at      200 

40  doz.  Klostersilk  floss,     at  300 

BEPTEMBES  12 

Gave  Mills  &  Gibb  our  check  for  the  net  amount  due  today  on  their  invoice  of  Sep- 
tember 2. 

Mr.  Austin,  our  traveling  salesman,  submitted  a  report  of  expenses  amounting 
to  $37.65. 

Bought  an  invoice  of  Mdse  amounting  to  $254.90  from  John  V.  Farwell  &  Co., 
terms  6/10  5/30  4/60. 


196  DRY   GOOODS    BUSINESS 

Sold  to  the  Lawndale  Dry  Goods  Co.,  City,  terms  net  10  days: 

12  pes.  27-in.  White  India  linen,   24  yds.  each,  ***yds.  at    .** 

4  pes.  Pride  of  the  West  sheeting,  bleaehed,     49,  50^,  49f,  50— ***yds.  at     lie 

10  pes.  Prineess  longcloth,     12  yds.  eaeh,  ***yds.  at     .** 

Sold  to  the  Geo.  W.  Graham  Co.,  Crawfordsville,  Ind.,  terms  30  days  net: 

12  pes.  Nainsook,  plain,     24  yds.  each,  ***yds.  at     .** 

4  pes.  Foulard  silk  imported,    29,  30|,  31,  29f—  ***yds.  at    65c 

Paid  Chas.  O.  Leonard's  salary  in  cash. 

Post  your  books  and  take  a  trial  balance.    Rule  up  personal  accounts  that  balance. 

SEPTEMBEB  14 

Received  Strawbridge  &  Clothier's  check  for  our  invoice  of  Sept.  4  less  2%. 

Paid  Chas.  Rubens  &  Co.,  for  the  invoice  purchased  of  them  on  Sept.  5,  less  discount. 

We  offered  to  return  as  defective  a  part  of  the  goods  bought  of  John  V.  Farwell  & 
Co.,  on  Sept.  13,  but  they  preferred  to  allow  us  $10.50  on  account  and  let  us  keep  the 
Mdse.    They  therefore  sent  us  a  credit  memorandum  for  $10.50. 

Sold  to  Tom  Smith,  Peoria,  111.,  terms  2/10  1/30  n/60: 

3  pes.  Lonsdale  cambric  muslin,     56,  STj,  57 — •  ***  yds.  at       10|j5 
6  pes.  Falcon  percale,     28,  30i  29,  281,  29,  28—  ***  yds.  at  7jt 

12  doz.  Coats'  Spool  Cotton,  at  580  *.♦* 

Less  7%  .*♦ 

Petty  cash  sales  for  the  day,  $14.40. 

SEPTEMBER  17 

Bought  of  Marshall  Field  &  Co.,  an  invoice  amounting  to  $234.50,  terms  2/10  n/60. 
Lord  &  Thomas  submitted  a  bill  amounting  to  $142.50  for  magazine  advertising 
done  for  us.     We  gave  them  our  30-day  note  at  6%. 

No  account  is  kept  with  Lord  &  Thomas.  Handle  this  transaction  through  the  journal.  Debit 
Expense,  as  no  advertising  account  is  kept. 

Paid  by  check  H.  B.  Claflin  &  Co.'s  bill  dated  August  18,  less  1%  discount  (See 
transaction  of  August  22). 

Sold  to  J.  H.  McCabe,  terms  1/10  n/60: 

4  pes.  Indian  Head  sheeting,  bleached,     4U,  39,  40i,  39f—  ***yds.  at     ll§c 
6  pes.  Indian  Head  sheeting,  brown,  39,  39^  42,  39f,  40,  41— ***yds.  at         8c 

10  pes.  32-in.  White  Persian  lawn,     24  yds.  each  ***yds.  at        .** 

SEPTEMBEB  19 

Bought  of  Mills  &  Gibb  Mdse  invoiced  at  $150.00,  terms  2/10  n/30  October  1  dating. 

Haskett  &  Co.  paid  for  the  Mdse  sold  them  on  August  20,  less  the  discount  allowed 
them. 

Received  J.  H.  McCabe's  check  for  the  amount  of  the  invoice  sold  him  on  Sept.  9 
less  the  discount  allowed. 


TRANSACTIONS   FOR   SEPTEMBER  197 

Paid  Carson,  Pirie,  Scott  &  Co.,  in  cash  for  the  Mdse  invoiced  to  us  on  the  9th  inst., 
less  discount. 

Before  computing  the  discount  on  this  bill,  deduct  the  amount  of  the  goods  returned  on  Sept.  9, 
as  it  is  apparent  that  we  are  not  entitled  to  any  discount  on  goods  we  did  not  keep. 

Petty  cash  sales  for  the  day,  $17.30. 

Paid  Mr.  Leonard's  salary  in  cash. 

Post  your  books.    Close  any  personal  accounts  that  balance. 

SEPTEMBEB  21 

Haskett  &  Co.  settled  for  the  bill  of  goods  they  bought  of  us  on  Sept.  11,  discount- 
ing in  accordance  with  the  terms  of  sale. 

Sold  to  Strawbridge  &  Clothier,  Philadelphia,  Pa.,  terms  6/10  5/30  4/60: 

268  rolls  White  Rose  cotton  batts  (12  oz.),     at  15^ 

140  doz.  Klostersilk  floss,     at  30^ 

10  pes.  4.5-in.  White  French  lawn,     35  yds.  each,  •**  yds.  at   .** 

4  pes.  Wamsutta  cambric  muslin,     56|,  57,  56,  58i —  ***  yds.  at     11^ 

6  pes.  Gibraltar  percales,    29^,  28,  SOJ,  31,  29,  30—  ***  yds.  at    6i^ 

Sold  to  B.  Nugent  &  Bros.,  St.  Louis,  Mo.,  terms  2/10  1/30  n/60: 

4  pes.  Imperial  F.  unbleached  bunting,    47,  48J,  47J,  48 —          ***  yds.  at  3iji 

6  pes.  Fruit  of  the  Loom  cambric  muslin,  56,  58,  57 J,  56i,  59,  62 — ***  yds.  at  1 10 

20  p>c8.  32-in.  Swiss  mull,     24  yds.  each,                                           ***  yds.  at  .** 

Paid  Marshall  Field  &  Co.'s  mvoice  dated  August  22,  for  $110.00. 

SEPTEMBER  2i 

Received  the  Lawndale  Dry  Goods  Co.'s  30-day  note  at  6%  for  the  invoice  sold 
them  on  September  12. 

Bought  Mdse  of  Marshall  Field  &  Co.  amounting  to  $132.30.  Terms,  6/10  5/30  4/60. 
Paid  John  V.  Farwell  &  Co.  for  their  bill  of  September  12,  less  6%  discount. 
Deduct  the  amount  of  the  allowance  they  made  to  us  on  Sept.  14  before  computing  the  discount. 

Discounted  at  the  bank  at  4%  the  interest-bearing  note  received  today  from  the 
Lawndale  Dry  Goods  Co. 

Purchased  Mdse  amounting  to  $59.60  from  Carson,  Pirie,  Scott  &  Co.,  terms  net 
30  days. 

Received  Chicago  exchange  from  Tom  Smith,  Peoria,  111.,  in  settlement  of  our  bill 
against  him  dated  September  14. 

Received  a  credit  memorandum  from  Marshall  Field  &  Co.,  $7.35,  to  cover  a  short- 
age on  goods  received  from  them  today. 

SEPTEMBER  26 

Paid  Marshall  Field  &  Co.'s  bill  of  the  17th  inst.,  less  discount. 

Mr.  Austin  submits  a  report  of  traveling  expenses  amounting  to  $51.50. 

Paid  Mr.  Leonard's  salary  in  cash. 

Post  your  books. 


198  DRY   GOODS   BUSINESS 

SEPTEMBER  28 

Sold  to  J.  H.  McCabe,  716  47th  St.,  City,  terms  2/10  n/30: 

4  pes.  Dwight  Anchor  9-4  sheeting,  bleached,  41,  40J,  42,  39i— ***  yds.  at     24^ 
3  pes.  Amoskeag  XX  ticking,     33,  34,  34 1 —  ***  yds.  at      13^ 

5  pes.  Pequot  10-4  sheeting,  brown,     40,  41 1,  41,  40i,  46^—      ***  yds.  at     260 
10  pes.  27-in.  White  India  linen,     24  yd.  pes.,  ***  yds.  at     .** 

Sold  to  B.  Nugent  &  Bros.,  St.  Louis,  Mo.,  terms  2/10  1/30  n/60: 

3  pes.  Gibraltar  percale,    28,  30^,  293 —  **  yds.  at    6i0 

4  pes.  Amoskeag  denim,    465,  45,  47J,  49 —  ***  yds.  at    130 

3  pes.  Berkeley  300  cambric  muslin,     57,  59J,  58 —  ***  yds.  at    200 
8  pes.  32-in.  White  Persian  lawn,    24  yds.  each,                            ***  yds.  at     .** 

Sold  to  Haskett  &  Co.,  City,  terms  2/10  1/30  11/6O: 

30  doz.  Klostersilk  floss,    at  30(i 

3  pes.  Berkeley  300  muslin  cambric,    44^,  43},  42J—  ♦♦♦  yds.  at     200 

3  pes.  Imperial  chambray,     51,  53j,  54 —  ***  yds.  at      110 

10  pes.  45-in.  White  French  lawn,     35  yds.  each,  ***  yds.  at     .** 

SEPTEMBER  29 

Bought  of  John  V.  Farwell  Co.,  an  invoice  of  Mdse  amounting  to  $84.50,  terms 
2/10  1/30  n/60. 

Sold  to  Geo.  W.  Graham  Co.,  Crawfordsville,  Ind.,  terms  2/10  1/30  n/60 
6  pes.  Berkeley  300  cambric  muslin,    67,  60,  59 J,  58,  60,  60i—  ***  yds.  at    200 
6  pes.  Amoskeag  denim,     46^,  45,  47f,  49,  48 —  ***  yds.  at     130 

4  pes.  Gibraltar  percales,    28,  30^,  29 f,  29—  *♦*  yds.  at    6i0 

Also  the  following,  billed  at  6/10  5/30  4/60: 

10  pes.  36-in.  Handkerchief  linen,  sheer,     12  yds.  each,  ***  yds.  at     .*• 

12  pes.  Princess  longcloth,     12  yds.  each,  ***  yds.  at     .** 

Petty  cash  sales  for  the  day,  $35.20. 

SEPTEMBER  SO 

The  Geo.  W.  Graham  Co.  put  in  a  claim  for  $24.00  for  goods  received  in  damaged 
condition  and  we  allowed  this  claim. 

Paid  Mr.  Austin's  salary,  $100.00,  in  cash. 

Post,  take  a  trial  balance,  make  statements,  and  close  ledger  accounts,  following 
the  instructions  given  on  August  31.  In  making  your  statements,  use  the  following 
inventories : 


Merchandise 

$12769.65 

Furniture  &  Fixtures 

875.00 

Unexpired  Insurance,  10  months 

**  ** 

Trunks 

32.50 

Salary  earned  and  unpaid,  3  days 

10.71 

Int.  due  on  note  favor  Lord  &  Thomas 

^** 

SUPPLEMENTARY    PROBLEMS 


The  purpose  of  the  work  which  follows  is  to  give  you  practice  in  solving  some  of  the 
problems  most  frequently  arising  in  practical  accounting,  and  at  the  same  time  to  give 
you  a  broader  comprehension  of  the  subject  through  familiarizing  you  with  many  new 
terms,  and  showing  you  how  the  principles  you  learned  can  be  applied  to  many  new  con- 
ditions. In  mastering  these  problems,  you  wUl  receive  much  more  benefit  than  that 
derived  from  the  keen  mental  exercise  they  will  give  you;  for  each  problem  presents  some 
important  phase  of  accounting  or  of  business.  A  careful  study  of  the  problems  in  this 
section  will  give  you  a  sharper  appetite  for  the  more  advanced  accounting  which  you 
will  encounter  in  your  study  of  Wholesale  Accounting,  Mercantile  Accounting,  and  Modern 
Corporation  Accounting. 

THE    MERCHANDISE   ACCOUNT   SUBDIVIDED 

In  all  of  your  work  except  the  last  set,  j-ou  carried  in  your  ledger  one  Mdse.  account,  which  was 
debited  with  all  costs  of  Mdse  and  credited  with  all  returns.  In  houses  where  the  bookkeeping  is  vol- 
uminous or  it  is  desired  to  more  closely  anal3'ze  the  trading  transactions,  it  is  usual  to  subdivide  the  Mdse 
account.  One  subdivision  of  the  Mdse  account  was  illustrated  in  the  last  set.  The  following  exercises 
illustrate  several  other  more  or  less  extensive  subdivisions  of  the  Mdse  account. 

PROBLEMS 

Problem  1.  Mr.  A  keeps  three  Mdse  accounts,  called  respectively  Mdse  Sales,  Mdse  Purchases,  and 
Mdse-Gerierul.  Mdse-General  shows  an  inventory  of  $6574.50.  Mdse  Sales  is  credited  $1245.00  and 
debited  $143.25.  Mdse  Purchases  is  debited  $2369.70  and  credited  $175.00.  Open  these  three  accounts, 
filling  in  amounts  only,  without  dates  or  explanations.  Close  Mdse  Purchases  and  Mdse  Sales  into  Mdse- 
General.  Close  Mdse-General  with  an  inventory  of  $7813.69.  What  is  the  gain  on  Mdse?  What  is  the 
cost  of  the  goods  sold?  What  is  the  percentage  of  profit,  based  on  the  cost  of  the  gootls  sold?  What 
is  the  percentage  of  the  "turn-over;"  that  is,  what  ratio  does  the  cost  of  the  goods  sold  bear  to  the  entire 
cost  of  the  goods  handled? 

Problem  2.  Mr.  B  keeps  the  same  accounts  as  Mr.  A  in  problem  1,  and  he  also  keeps  an  In-Freight 
account  and  an  Out-Freight  account  (In-Freight  includes  freight  and  drayage  on  goods  coming  into  the 
store;  Out- Freight  includes  freight  and  drayage  on  goods  shipped  out.)  These  accounts  stand  as  follows: 
In-Freight,  Dr.  125.00;  Cr.  13.50.  Out-Freight,  Dr.  64.75;  Cr.  23.50.  Mdse  Sales,  Dr.  15.60;  Cr.  1343.65. 
Mdse  Purchases,  Dr.  1500.00;  Cr.  120.00.  Mdse-General  has  an  inventory  dated  the  first  of  the  month, 
of  $5360.00.  Open  the  accounts.  Close  In-Freight  into  Mdse  Purchases.  Close  Out-Freight  into  Mdse 
Sales.  Close  Mdse  Sales  and  Mdse  Purchases  into  Mdse-General.  Close  Mdse-General  with  an  inventory 
of  $5495.75.     Answer  the  questions  asked  at  the  end  of  problem  1. 

Problem  3.     Mr.  C  keeps  a  very  complete  system  of  Mdse  costs  and  returns.    The  following  chart 

will  show  you  at  a  glance  what  trading  accounts  he  keeps  and  how  he  closes  them,  as  well  as  showing  how 

these  accounts  stood  at  the  time  of  the  last  trial  balance.     You  will  have  to  determine  which  items  are 

debits  and  which  are  credits. 

Accotmts  Kept  by  Mr.  C. 

Cash  Dis.  Dr.        Debit  footing  $74.50  ^ 

Out-Freight  Paid    for   freight    $49.70  I  Mdse  Sales 

Charged   back  to  customers  $10.00      ("         Total  Sales  $1569.00 
_      .    ..  J 


Rebates  By  Us     Total  allowances  to  customers  $27.65 

Cash  Dis.  Cr.        Credit  footing  $210.50 
In-Freight  Paid  ior  frei^t  $220.00 

Charged  back  to  creditors  $76.25 
Rebates  To  Us    Total  allowances  by  creditors  $70.00 


Mdse  Purchases 

Total  Purchases  $1246.79 


Mdse-General 

Last      In- 

V  e  n  t  o  ry 

$7895.00 


Open  all  accounts  with  the  items  shown  in  the  above  list.  Close  them  in  the  order  suggested  by  the 
outline,  closing  Mdse-General  last  with  an  inventory  of  $8150.00.  Answer  the  questions  asked  at  the 
end  of  Problem  1. 

199 


200 


SUPPLEMENTARY   PROBLEMS 


COSTS    AND    EXPENSES    SUBDIVIDED 

Problem  4.  Mr.  D,  a  manufacturer  of  Tools  and  Implements,  must  keep  records  not  only  of  his 
purchases  and  sales,  but  of  his  costs  of  manufacturing.  The  outline  below  shows  what  trading  and  manu- 
facturing accounts  he  keeps  and  how  he  closes  them,  as  well  as  showing  you  the  condition  of  these  accounts 
at  the  time  of  the  last  trial  balance,  June  1.  You  will  have  to  determine  whether  the  amounts  are  debits 
or  credits. 


Accounts  Kept  by  Mr.  D. 


Materials 

Invty  June  1,  $6726.00 

Purchased  during  June  $789.50 
Labor 

Invty  June    1,    $125.00    (brought 
down  on  Credit  side) 

Payrolls  during  June  $457.50 
Buying  Expense 

Buyers'  Salaries  &  Exp.  $476.25 
In-Freight 

Paid  for  freight  $72.60 

Charged  back  to  creditors  $10.00 
Cash  Discounts  on  Purchases 

Total  discounts  taken  $100.50 
Rebates  and  Allowances  on  Pur. 

Total  footing  $25.00 

Selling  Expense 

Salesmen's  Salys  &  Exp.  $650.00 
Shipping  Expense 

Salys  and  Exp.  $100.00 
Out-P'reight 

Paid  for  freight  $97.20 

Charged  back  to  customers  $12.50 
Cash  Discounts  on  Sales 

Total  discounts  allowed  $220.00 
Rebates  and  Allowances  on  Sales 

Total  footing  $10.75 


'  Mfg.  Cost 


Sales 

Total  sales  for  June,  $3924.50 


Tools    &    Implements 
(The  Mdse  ucct) 
'  Inventory  June  1, 
$24350.00 


Explanation 

The  Materials  account  contains  a  record  of  costs  of  Materials  purchased.  This  account  is  often  greatly 
subdivided,  separate  accounts  being  kept  with  all  classes  of  materials  used. 

The  Labor  account  contains  a  record  of  all  costs  of  labor  of  manufacture.  The  inventory  June  1 
is  the  amount  of  unpaid  wages  due  workmen  at  that  time.  This  account  is  often  greatly  subdivided, 
separate  accounts  being  kept  with  all  the  different  classes  of  labor  performed. 

Buying  Expense.  The  house  has  to  employ  buyers  to  select  the  materials  used.  Their  salaries  and 
the  expenses  they  incur  in  the  business  trips  they  must  take  from  time  to  time  are  properly  chargeable 
to  this  account. 

Open  accounts  with  the  balances  given  in  the  outline.  Close  the  accounts  as  indicated  by  the  out- 
line, using  the  following  inventories,  and  dating  the  closing  entries  June  30:  Materials  (raw  materials 
and  unfinished  tools  and  implements)  $6543.60.  Labor  (unpaid  wages  of  workmen)  $56.70.  Tools  & 
Implements,  $25467.75.     Find  the  gain. 


SCHEDULES 

In  most  lines  of  business,  the  number  of  accounts  in  the  ledger  or  ledgers  is  so  great  that  a  statement 
showing  them  all  in  detail  would  be  a  very  long  document.  The  custom  has  therefore  arisen  of  showing 
condensed  statements,  so  called  because  items  of  a  similar  kind  are  condensed  into  a  single  item  in  order 
to  make  the  statement  shorter  and  more  easily  comprehended.  The  items  so  condensed  are  shown  on 
separate  sheets,  called  schedules.  Thus,  all  sales  accounts  might  be  shown  on  a  schedule,  and  their  total- 
only  shown  in  the  statement.  Purchase  accounts,  notes  receivable,  notes  payable,  inventories,  etc.,  may 
also  be  treated  in  this  manner. 


SCHEDULES 


201 


Problem  6. 

CONDENSED  FINANCIAL  STATEMENT 

Assets 

Cash See  Schedule  A 

Properties See  Schedule  B 

Mdse  Invty See  Schedule  C 

Expense  Inventys-Assets See  Schedule  C 

Notes  Rec.  with  accrued  Int See  Schedule  D 

Accounts  Receivable See  Schedule  D 

Total  assets 

lAabUities 

Expense  Invtys-Liabilities See  Schedule  C 

Notes  Pay.  with  accrued  Int See  Schedule  E 

Accounts  Payable See  Schedule  E 

Total  liabilities 

Net  Investment 


**** 

** 

***** 

** 

**** 

** 

*** 

** 

*** 

*♦ 

**** 

** 

*4c«*4t   ** 


**    ** 

****** 

***   ** 


Cash  Assets — Schedvile  A 

Cash  in  Safe  $    250.00 

Cash  on  Hand  at  Branch  Store  75.50 

On  Deposit  1st  Natl  1256.00 

2d  Natl  780.00 

Petty  Cash  45.75 


Properties — Schedule  B 

Store  &  Lot  at  236  Main  St. 
Barn  at  5673  Church  St. 
2  Horses  and  2  Wagons 
Furn.  &  Fix.  at  236  Main  St. 
Mortgage,  238  Main  St. 


*4t**  ** 


$12500.00 

725.00 

520.00 

825.00 

4000.00 

*****  ** 


Merchandise  and  Other  Inventories 


Schedule 

2000  bu.  Wheat  at  $1.05 

4000  bu.  Oats  at  .60 

3000  bu.  SheUed  Corn  at  .56 

Total  Mdse 


Postage  Stamps  Unused 
10  Mo.  Fire  Ins.  Unexpired 

Total  Ex.  Invtys-assets 
Less  Sal.  due  employees 


****** 
****  ** 


$12.00 
100.00 


27.50 


«:*  ** 


Notes  and  Accts  Rec — Schedule  D 

Sales  Accounts  Dr 


J.  D.  Arnold 
E.  C.  Smith  >■ 

A.  L.  Adams 
Jno.  C.  Stamp 

Less  E.  B.  Hamilton  Cr.  Bal. 


Notes  Receivable  (Int.  Accrued) 
C.O.Bowman       $100.50       (2.25) 
R.  A.  Gates  475.00       (1.27) 


125.00 
472.00 
275.65 
756.70 


**** 

** 

2 

35 

**** 

** 

*** 

** 

**** 

** 

Notes  and  Accts  Pay. — Schedule  E 

Accoutits 
Frank  P.  Carson  500.00 

Victor  Moore  127.75 


Notes  (Int.  Accrued) 
F.  L.  Steams  $1000 .00  (4 .  50) 
A.  D.  Wilt  &  Co.     750 .00       (2 .  17) 


Prepare  the  five   schedules  and   the  financial  statement. 


202 


SUPPLEMENTARY   PROBLEMS 


CORRECTIONS   AND   ADJUSTMENTS 


/ 


Read  again  the  instruction  for  Correcting  Errors,  given  on  page  171. 

Problem  6.  On  Jan.  24,  19 — ,  you  debited  the  Expense  account  for  a  freight  bill  of  S27.50  for  Mdse 
received.  On  January  27  you  discovered  your  error  and  made  a  correction  entry  in  the  journal.  Show 
the  entry. 

Problem  7.  During  the  month  of  January,  19 — ,  four  C.O.D.  sales  were  made,  totaling  $240.00. 
These  were  entered  in  the  sales  book  at  full  price,  and  posted  to  the  C.O.D.  account.  The  collections 
were  made  on  a  basis  of  1%  discount,  and  the  C.O.D.  account  credited  with  net  cash  returns  only.  What 
entry  is  necessary  to  balance  the  C.O.D.  account? 

Adjustment  Entries.  An  adjustment  entry  is  an  entry  which  is  made  for  the  purpose  of  changing 
or  altering  certain  balances  so  that  they  shall  more  correctly  represent  business  conditions.  An  instance 
of  this  is  an  entry  which  equalizes  partners'  accounts,  the  consideration  being  a  payment  from  one  partner 
to  the  other  not  entered  on  the  books.  Another  instance  is  an  entry  crediting  the  partners  with  interest 
on  their  respective  investments;  such  an  entry  equalizes  or  adjusts  the  difference  between  the  partners 
arising  from  the  fact  that  the  investment  of  one  is  larger  than  that  of  the  other.  A  correction  entry  is 
usually  occasioned  by  a  definite  error  or  omission  of  an  entry;  an  adjustment  entry  is  usually  made  neces- 
sary by  some  wrong  condition  that  does  not  show  in  any  specific  entries  in  the  books. 

Problem  8.  W.  J.  Simms  and  R.  E.  Glavis  are  partners  under  an  agreement  that  they  are  to  share 
gains  and  bear  losses  equally,  the  difference  in  their  average  investment  being  adjusted  on  a  basis  of  6% 
interest.  At  the  end  of  the  year  1910  it  is  found  that  W.  J.  Simms'  average  investment  has  been  $9000.00, 
while  the  average  investment  of  R.  E.  Glavis  has  been  $6000.00.  Three  ways  of  adjusting  the  difference 
in  investment  are  proposed:  First,  each  partner  to  be  credited  with  interest  on  his  total  average  invest- 
ment; Second,  W.  J.  Simms  to  be  credited  with  interest  on  the  excess  of  his  investment  over  that  of  his 
partner;  Third,  one  partner  to  be  credited  and  the  other  debited  with  a  certain  amount.  Make  a  proper 
journal  entry  for  each  case.  State  what  would  be  the  effect  of  each  plan  upon  the  firm's  showing  of  profits 
for  the  year,  and  upon  its  net  capital,  as  shown  in  the  statements  before  closing;  as  shown  by  the  closed 
ledger. 

Problem  9.  A  and  B  are  partners  in  business  under  an  agreement  that  they  are  to  keep  the  amounts 
of  their  investments  equal  and  are  to  share  equally  in  gains  and  losses.  The  fiscal  year  ends  July  1,  19 — , 
On  January  1,  19 — ,  B  withdraws  $1000.00  from  the  firm.  Money  is  considered  worth  6%.  At  the  end 
of  the  fiscal  year,  July  1,  three  methods  of  settlement  are  proposed:  First,  B  to  pay  A  a  certain  amount 
of  cash;  second,  B  to  pay  into  the  business  a  certain  amount  of  cash;  third,  A  to  withdraw  a  certain  amount 
of  cash.  State  the  equitable  amount  in  each  case  and  tell  what  the  debits  and  credits  on  the  books 
would  be. 

Problem  10.  H.  S.  Gray  and  W.  H.  Butler  are  partners  whose  investments  are  respectively  40% 
and  60%  of  the  entire  capital.  They  have  on  hand  R.  E.  Parker's  note  for  $750.00  which  Mr.  Gray  con- 
siders bad.  Mr.  Butler  disagrees  with  him,  and  offers  to  buy  his  share  of  the  note  for  $250.00.  Show 
the  necessary  journal  entry,  making  proper  explanations. 


PARTNERSHIP 

Problem  11.  Jan.  1,  1910.  E.  M.  Adler  and  Claude  Brown  united  in  business.  Mr.  Brown  invested. 
Mdse,  $3500.00;  Accounts  Receivable,  $1500.00;  and  brought  into  the  partnership  debts  amounting  to 
$650.00,  $100.00  of  which  was  on  a  note.  Mr.  Adler  invested:  Furniture  and  Fixtures,  $534.50;  Mdse, 
$362.75;  Accounts  Receivable,  $2050.00;  and  brought  into  the  partnership  accounts  payable  amounting 
to  $750.00.  Each  partner  deposited  to  the  credit  of  the  firm  cash  enough  to  bring  his  total  investment 
up  to  $7500.00.  The  profits  of  losses  were  to  be  divided  equally.  Journalize  the  opening  entries  and 
post  them  to  the  ledger. 

During  the  year  following,  the  business  done  was  as  follows:  Mdse  purchases  on  account,  $12500.00; 
Mdse  sales  on  account,  $20560.00;  cash  sales  of  Mdse,  $2500.00;  cash  received  on  account,  $17240  00; 
cash  paid  on  account,  $13430.00;  note  paid  (with  $1.50  interest),  $101.50;  expenses  for  the  year,  paid  in 
cash,  $3875.60;  cash  invested  in  real  estate,  $5000.00;  E.  M.  Adler  and  Claude  Brown  each  withdrew  $50.00 
a  month  in  cash,  throughout  the  year  (not  salary).  Make  the  journal  entries  for  the  foregoing,  dating 
them  Dec.  31,  1910,  and  post  them. 


proprietors'  private  accounts  203 

At  the  close  of  the  year,  Adler  &  Brown  found  that  they  had  on  hand  fvimiture  and  fixtures  valued 
at  $510.00  and  a  stock  of  Mdse  worth  $4234.50.  They  valued  the  real  estate  at  cost.  Take  a  trial  bal- 
ance and  make  statements,  as  of  Dec.  31,  1910,  showing  the  condition  of  the  business  and  the  investments 
of  the  partners  after  the  profits  of  the  business  hud  been  credited  to  them. 

Jan.  1,  1911.  Claude  Brown  retired  from  the  business.  Upon  the  consideration  of  his  absolute 
withdrawal  from  the  same  line  of  business  in  the  same  city  for  five  years,  E.  M.  Adler  agreed  to  pay  him 
$3000.00  more  than  the  balance  of  his  investment.  The  cash  balance  was  not  large  enough  to  permit 
a  cash  settlement  with  Mr.  Brown,  but  there  were  several  ways  in  which  a  settlement  could  be  effected. 
Make  the  journal  entries  required  for  each  of  the  following  cases. 

Case  1.  Claude  Brown  selected  $6000.00  worth  of  customers'  accounts  which  he  considered  good, 
and  Adler  &  Brown  assigned  them  to  him,  together  with  cash  for  the  balance  of  his  investment  as  shown 
in  the  ledger.     E,  M,  Adler  gave  him  his  note  for  the  $3000.00  bonus,  charging  Goodwill. 

GOODWILL 

The  reputation  and  standing  of  a  business  house,  the  fact  that  it  is  well  known  to  those  who  buy  the 
things  it  has  for  sale,  and  many  other  factors,  combine  to  produce  a  strong  probability  of  future  patronage, 
which  probability  has  a  money  value,  and  is  called  Goodwill  (i.e.,  the  goodwill  of  the  community,  which 
the  house  has  earned).  This  Goodwill  often  exists  without  any  showing  on  the  books  (in  fact,  more  often 
than  not  this  is  the  case);  but  when  money  is  actually  paid  out  to  an  incoming  partner  for  goodwill  he 
brings  with  him  or  to  an  outgoing  partner  for  goodwill  he  leaves  behind  him,  an  account  should  be  opened 
called  Goodwill,  which  should  be  charged  with  the  amount  of  Goodwill  purchased.  Goodwill  is  an  asset. 
It  is  an  uncertain  asset,  it  is  true,  because  a  breath  of  suspicion  may  cause  it  to  dissolve  and  vanish  at 
once  and  for  the  further  reason  that  its  value  is  always  a  debatable  quantity.  Hence  it  is  a  dangerous 
item  to  carry  on  the  books,  and  the  greatest  judgment  must  be  exercised  in  determining  the  extent  to 
which  it  shall  be  carried.  A  safe  rule  is  to  carry  such  items  only  when  goodwill  is  actually  bought  or  sold, 
as  suggested  above.  When  it  does  appear  on  the  books,  however,  it  appears  as  an  asset;  if  money  is 
received  from  an  incoming  partner  for  his  share  of  the  goodwill  of  the  business  (i.e.,  goodwill  is  sold),  the 
goodwill  account  should  be  credited  if  there  is  a  goodwill  account  already  on  the  books  which  adequately 
represents  the  value  of  the  firm's  goodwill;  but  if  not,  the  item  should  be  credited  to  the  investment 
accounts  of  the  original  partners  or  paid  to  them  in  cash  or  other  assets;  thus  the  debit  side  of  the  good- 
will account  will  always  be  the  larger  unless  the  account  balances. 

Case  2.  Claude  Brown  owes  a  personal  note  of  $5000.00  to  the  First  National  Bank,  which  Adler 
assumes;  Adler  gives  Brown  his  note  for  $4000.00,  and  pays  him  cash  for  the  balance  due  him  including 
the  $3000.00  bonus  for  his  share  of  the  goodwill. 

Note: — If  Mr.  Brown's  share  of  the  goodwill  was  worth  $3000.00,  Mr.  Adler's  share  should  be  estimated 
at  a  like  sum.  If  Mr.  Adler  should  wish  this  additional  $3000.00  worth  of  goodwill  to  show  on  the  books, 
he  could  debit  Goodwill  and  credit  his  investment  account  for  the  amount. 

PROPRIETOR'S   PRIVATE   ACCOUNTS 

The  proprietor  may  wish  to  keep  a  separate  record  of  current  petty  charges  and  credits  on  his  own 
account.  In  this  case  he  opens  an  account  for  this  purpose  which  he  calls  his  "private"  account,  to  dis- 
tinguish it  from  his  "investment"  account. 

This  plan  of  keeping  a  private  account  and  an  investment  account  is  particularly  desirable  when  there 
are  partners  whose  investments  should  constantly  bear  a  certain  proportion  to  each  other.  The  private 
accounts  of  the  partners  are  debited  with  all  small  charges  for  merchandise  or  cash  withdrawn,  and  credited 
with  payments  made  on  them,  if  any.  The  losses  and  gains  of  the  business  are  usually  carried  to  the 
private  accounts.  The  investment  accoimts  remain  unchanged,  except  when  by  special  agreement  a  partner 
increases  or  decreases  his  own  capital.  When  interest  is  allowed  each  partner  on  his  investment,  this 
interest  is  figured  on  the  balance  of  the  investment  account,  and  is  usually  credited  to  the  private  account. 
Should  the  balance  of  the  private  account  grow  to  any  considerable  amount,  it  or  a  part  of  it  may  be 
closed  to  the  investment  account,  thus  increasing  or  decreasing  the  latter.  There  is  no  legal  distinction 
between  the  two  accounts;  the  distinction  is  a  purely  technical  one  in  bookkeeping,  and  the  two  accounts 
are  usually  kept  separate  for  purposes  of  business  convenience  solely. 


\1 


204  SUPPLEMENTARY   PROBLEMS 

Problem  12.     Geo.  S.  Harding  and  E.  H.  Swift  are  partners.     Each  has  an  investment  account  and 
a  private  account  in  the  ledger.     They  are  to  divide  gains  or  bear  losses  in  the  proportion  which  their 
investment  accounts  bear  to  each  other.     Gains  are  carried  to  the  private  accounts,  but  each  has  the 
privilege  of  adding  to  his  investment  as  often  and  as  much  as  he  wishes.     The  smallest  balance  shown 
by  a  partner's  investment  account  during  a  given  period  is  the  amount  on  which  his  share  of  the  gain 
is  to  be  figured.     On  Jan.  1,  19 — ,  the  proprietor's  accounts  stood  as  follows:    Geo.  S.  Harding — Invest- 
ment, Cr.,  $10000.00;  Geo.  S.  Harding— Private,  Dr.,  $27.50,  Cr.,  $128.75;  E.  H.  Swift— Investment, 
Cr.,  $7000.00.     E.  H.  Swift— Private,  Dr.,  $15.00,  Cr.,  $90.13.     Open  four  ledger  accounts  as  above, 
and  enter  in  them  the  debits  and  credits  affecting  them  in  the  following  transactions. 
19—. 
Jan.     4.     Geo.  S.  Harding  withdrew  $5.00  in  cash. 
Jan.     6.     E.  H.  Swift  took  Mdse  for  his  own  use,  $15.70. 
Jan.  31.     The  gain  for  the  month,  $319.60,  was  divided  between  the  partners. 
Feb.    2.     E.  H.  Swift  lost  $10.00  of  the  firm's  money. 
Feb.  15.     Geo.  S.  Harding  took  Mdse  for  personal  use,  $24.50. 
Feb.  28.     The  gain  for  the  month,  $285.60,  was  divided  between  the  partners. 

Feb.  28.  Geo.  S.  Harding  increased  his  investment  $400.00,  withdrawing  the  amount  from  his  private 
account. 

Mar.    5.     E.  H.  Swift  withdrew  $100.00  for  personal  use.     ' 
Mar.  10.     Geo.  S.  Harding  took  Mdse  worth  $12.50  for  his  home. 

Mar.  15.     E.  H.  Swift  withdrew  $150.00  from  his  personal  account  and  added  it  to  his  investment. 
Mar.  31.     The  loss  for  the  month  was  $86.40. 
Close  the  two  private  accounts. 

Problem  13.  M.  H.  Tiffany,  E.  C.  Case,  and  G.  D.  Ware  are  partners  under  an  agreement  that  each 
shall  be  allowed  interest  at  6%  on  the  excess  of  his  investment  over  the  average  investment,  or  charged 
interest  at  6%  on  the  deficiency  if  his  investment  is  less  than  the  average,  the  gains  or  losses  to  be  equally 
divided.  Mr.  Tiffany  is  a  dormant  partner,  Mr.  Case  draws  a  salary  of  $125.00  a  month,  and  Mr.  Ware 
draws  a  monthly  salary  of  $75.00.  Open  six  ledger  accounts  as  of  Jan.  1,  19 — ,  as  follows:  M.  H.  Tiffany 
—Investment,  Cr.  $15000.00;  M.  H.  Tiffany— Private,  Cr.  $120.00;  E.  C.  Case— Investment,  Cr.  $10000.00; 
E.  C.  Case— Private,  Dr.  $65.00,  Cr.  $100.00;  G.  D.  Ware— Investment,  Cr.  $5000.00;  G.  D.  Ware- 
Private,  Dr.  $23.50. 
19—. 
Jan.     5.     G.  D.  Ware  withdrew  cash  $10.00. 

Jan.  7.  E.  C.  Case  turned  over  to  the  firm  a  second-hand  bookcase  for  which  he  was  allowed  $23.50 
on  his  private  account. 

Jan.  20.     M.  H.  Tiffany  drew  against  the  firm  for  $50.00  and  the  draft  was  honored. 
The  salaries  of  the  partners  were  credited  to  them. 
The  interest  on  the  investments  of  the  partners  was  adjusted. 
The  gain  of  the  business  for  the  month  was  $852.00. 
M.  H.  Tiffany  increased  his  investment  $3000.00  by  a  cash  payment. 
E.  C.  Case  took  Mdse  for  his  personal  use,  $37.50. 
G.  D.  Ware  withdrew  cash,  $12.50. 
M.  H.  Tiffany's  bill  for  personal  taxes  due  the  city  was  at  his  request  paid  by  the  firm  in 

G.  D.  Ware's  salary  was  paid  to  him  in  cash.     Mr.  Case's  salary  was  credited  to  him. 
The  interest  on  the  investments  of  the  partners  was  adjusted. 
The  gain  of  the  business  for  the  month  was  $762.75. 

Each  partner  added  $500.00  to  his  investment,  taken  from  his  private  account. 
Close  the  partners'  personal  accounts. 

PRIVATE  LEDGERS 

When  it  is  desired  to  withhold  from  the  bookkeepers  certain  important  facts  in  regard  to  the  business, 
this  can  be  done  through  the  use  of  a  private  ledger,  the  aggregate  footings  of  this  ledger,  or  the  total  of 
its  balance,  being  supplied  for  the  completion  of  the  trial  balance. 


Jan. 

31. 

Jan. 

31. 

Jan. 

31. 

Jan. 

31. 

Feb. 

3. 

Feb. 

7. 

Feb. 

8. 

cash,  $14.50. 

Feb. 

28. 

Feb. 

28. 

Feb. 

28. 

Feb. 

28. 

CONTROLLING   ACCOUNTS  205 

Problem  14.  Mills  &  Co.  is  a  partnership  of  three  persons  whose  investment  accounts  are  kept  in 
a  private  ledger,  though  their  private  accounts  are  kept  in  the  general  ledger.  The  Real  Estate  account 
is  also  kept  in  the  private  ledger,  the  Reserve  for  Depreciation  on  Real  Estate  account  being  kept  in  the 
general  ledger.  The  trial  balance  of  the  general  ledger  is  as  follows:  Cash,  $1562.50;  Mdse,  Dr.  $8750.65, 
Cr.  $763.49;  Expense,  $275.40;  Accounts  Receivable,  $1456.70;  Accoiuits  Payable,  $476.50;  E.  C.  Mills 
(Prop.)— Private  Accovmt,  Dr.  $10.20,  Cr.  $100.00;  H.  W.  Roberts  (Prop. )— Private  Account,  Dr.  $14.50; 
F.  E.  Hauser  (Prop.) — Private  Account,  Dr.  $4.50,  Cr.  $50.00;  Reserve  For  Depreciation  on  Real  Estate, 
Dr.  $200.00,  Cr.  $560.00.  The  bookkeeper  is  given  the  balance  of  the  private  ledger,  $****.**,  and  is 
informed  that  $100.00  is  to  be  allowed  for  depreciation  on  real  estate.  The  merchandise  inventory  is 
$8500.00. 

Make  the  entry  for  depreciation  on  real  estate.  Prepare  a  trial  balance  before  closing,  statements, 
ftnd  a  trial  balance  after  closing.  (In  reconciling  the  results  of  the  two  statements,  i.e.,  preparing  the 
"proof,"  at  the  bottom  of  the  Loss  &  Gain  statement,  bear  in  mind  that  the  present  worth  equals  the 
sum  of  the  Reserve  for  Depreciation  on  Real  Estate  and  the  balance  of  the  Private  Ledger.)  You  will 
have  to  determine  from  the  figures  you  have,  the  amount  of  the  balance  of  the  general  ledger  in  each  trial 
balance.  In  practice  this  figure  would  be  supplied  to  you  or  your  figures  would  be  checked  by  the  person 
having  charge  of  the  genera)  ledger. 


CONTROLLING  ACCOUNTS 


\x 


This  is  the  term  applied  to  accoimts  in  the  general  ledger  which  represent  in  each  case  the  aggregate 
balances  of  accounts  of  a  certain  kind  kept  in  a  special  ledger,  the  controlling  account  alone  appearing 
in  the  trial  balance.  An  instance  of  this  is  the  Accounts  Receivable  account  in  the  general  ledger,  which 
represents  the  totals  of  the  sundry  sales  accounts  in  the  sales  ledger.  You  have  already  worked  some 
problems  in  which  his  account  has  appeared.  The  term  "controlling  account"  is  a  misnomer,  as  the 
smaller  accounts  really  control  the  larger  one  and  indicate  what  its  balance  is.  The  term  "representa- 
tive" would  be  a  better  one,  but  custom  seems  to  favor  the  word  "controlling."  An  extended  discus- 
sion of  controlling  accounts  cannot  be  given  here,  but  a  problem  is  given  which  will  illustrate  the  use  of 
a  controlling  account  in  connection  with  individual  customers'  accounts. 

Problem  15.  Books  kept:  Sales  Book,  Three-column  Cash  Book  (Dr.  side  only).  Journal,  Sales 
Ledger,  and  General  Ledger. 

Rule: — Whenever  items  are  posted  to  customers'  accounts  in  the  Sales  Ledger,  their  total  should  be 
posted  to  the  General  Ledger  in  the  usual  way  and  should  also  be  posted  to  the  Accounts  Receivable 
account  in  the  General  Ledger  on  the  same  side  as  that  affected  in  the  Sales  Ledger. 

Sales  were  made  as  follows:  March  1,  19 — .  D.  G.  Calvert,  $15.60;  Mar.  2,  T.  B.  Sullins,  $25.75; 
Mar.  3,  Jas.  Wilson,  $35.60;  Mar.  7,  D.  G.  Calvert,  $23.70;  Mar.  10,  L.  A.  Arnold,  $10.54;  Mar.  13,  Jas. 
Wilson,  $15.20;  Mar.  15,  T.  B.  Sullins,  $10.00;  Mar.  20,  D.  G.  Calvert,  $40.50;  Mar.  21,  L.  A.  Arnold,  $23.65; 
Mar.  23,  T.  B.  Sullins,  $20.00;  Mar.  27,  L.  A.  Arnold,  $43.60;  Mar.  28,  D.  G.  Calvert,  $23.50.  Enter  them 
in  the  Sales  Book.  Post  the  entries  to  the  Sales  Ledger.  Post  the  total  to  the  debit  of  Accounts  Receiv- 
able and  to  the  Credit  of  Mdse  Sales  in  the  General  Ledger. 

Cash  Payments  were  made  as  follows  (The  debit  columns  of  the  cash  book  are  headed,  from  left  to 
right.  Cash  Discount,  Accounts  Receivable  Credits,  General):  March  11,  19 — .  D.  G.  Calvert,  $15.60 
less  2%;  Mar.  12,  T.  B.  Sullins,  $25.75  less  2%;  Mar.  17,  D.  G.  Calvert,  $23.70  less  2%;  Mar.  20,  L.  A. 
Arnold,  $10.54  less  2%;  Mar.  23,  Jas.  Wilson,  $15.20  less  2%;  Mar.  25,  T.  B.  Sullins,  $10.00  less  2%;  Mar, 
30,  D.  G.  Calvert,  $40.50  less  2%;  Mar.  31,  L.  A.  Arnold,  $23.65  less  2%.  Enter  them  in  the  cash  book. 
Post  them  separately  to  the  sales  ledger.  Post  the  total  of  the  Cash  Discount  column  in  the  cash  book 
to  the  debit  of  the  Cash  Discount  account  and  to  the  credit  of  the  Accounts  Receivable  account.  Post 
the  total  of  the  Accounts  Receivable  Credits  column  to  the  credit  of  Accounts  Receivable  and  enter  the 
footing  in  the  general  column  on  the  debit  side  of  the  cash  book. 

On  Mar.  16,  Jas.  Wilson  gave  us  his  note  for  $35.60.  Make  a  journal  entry.  Post  the  credit  item 
to  Jas.  Wilson's  account  in  the  sales  ledger  and  also  to  the  Accounts  Receivable  account  in  the  general 
ledger.  The  ledger  is  not  thrown  out  of  balance  by  this  "double  posting,"  since  only  the  controlling 
account  appears  in  the  trial  balance.  The  effect  of  the  double  posting  is  to  keep  the  sales  ledger  and 
the  Accounts  Receivable  account  in  the  general  ledger  in  agreement. 


206  SUPPLEMENTARY    PROBLEMS 

If  you  have  followed  the  rule  stated  at  the  beginning  of  this  problem,  the  sum  of  the  sales  ledger  bal- 
ances should  equal  the  balance  of  the  Accounts  Receivable  account  in  the  general  ledger.  Prepare  an 
Accounts  Receivable  Proof,  which  is  a  list  of  the  balances  of  the  sales  ledger  accounts  showing  that  their 
total  equals  the  balance  of  the  controlling  account  in  the  general  ledger.  Prepare  a  trial  balance  of  the 
general  ledger. 


/ 


INVENTORIES 


Inventories  are  of  three  kinds. 

(1)  Property  that  is  bought  and  sold  in  the  regular  course  of  business — a  resource  inventory. 

(2)  Property  that  is  part  of  the  permanent  fbced  investment. 
Real  estate,  furniture  &  fixtures,  horses  &  wagons — resources. 

(3)  Unexpired  or  unused  parts  of  items  which  have  been  charged  to  Expense.      "I       Resources 
Accrued  interest  due  us  from  others.  j 

Accrued  expenses  of  any  kind  for  which  bills  have  not  been  submitted  to  us.     \  y  .  j^-i-^- 
Accrued  interest  due  others  from  us.  /  ^'^DUiues. 

1.  Property  that  is  bought  and  sold  in  the  regular  course  of  business. 

The  problem  of  ascertaining  the  Mdse  inventory  is  very  simple  and  easily  understood.  All  that  is 
necessary  is  to  count  the  quantities  of  each  item  on  hand,  multiply  the  quantity  by  the  price  in  each  case 
and  find  the  total.  Stock  records  can  be  kept  so  as  to  obviate  the  necessity  for  actually  handling  the 
goods  (i.e.,  taking  a  physical  inventory)  and  various  schemes  for  keeping  an  inventory  of  Mdse  by  account- 
ing have  been  devised.  The  final  test  of  the  Mdse  inventory,  however,  is  its  exact  count  and  actual  valu- 
ation (what  it  would  cost  to  replace  it  at  the  time  provided  this  is  not  higher  than  original  cost),  and 
there  are  few  merchants  who  do  not  take  an  actual  physical  valuation  of  stock  at  least  once  a  year. 

2.  Property  that  is  part  of  the  fixed  investment  may  be  coimted  and  valued  in  the  same  way,  but 
ordinarily  such  items  are  simply  kept  on  the  books  at  a  valuation  which  is  regularly  and  uniformly  reduced 
from  year  to  year  so  as  to  provide  for  deterioration,  wear  and  tear,  obsolescense  (going  out  of  use)  and 
so  forth.  This  reduction  may  be  accomplished  in  either  of  three  principal  ways:  (a)  The  amount  of  the 
inventory  may  be  reduced;  (b)  A  part  of  the  profits  can  be  set  aside  as  a  reserve  from  which  to  repair  and 
replace  the  property  as  it  wears  out;  (c)  Heavy  repairs  may  be  made,  thus  greatly  improving  the  prop- 
erty and  making  it  unnecessary  to  depreciate  the  inventory,  which  remains  unchanged,  as  the  repairs  are 
charged  to  a  separate  account,  which  is  classed  as  expense. 

If  depreciation  is  not  made  periodically  on  the  books,  nevertheless  depreciation  is  in  fact  constantly 
going  on,  and  when  a  proper  valuation  is  eventually  made  it  will  seem  that  a  heavy  loss  has  suddenly 
occurred.  This  loss  has  not  been  sudden  in  fact,  but  gradual;  therefore,  it  should  be  distributed  equitably 
throughout  the  different  periods  of  time  and  should  not  all  fall  on  one  period.  Depreciation,  whether 
accomplished  by  "writing  inventories  down"  or  by  the  carrying  of  a  reserve,  is  merely  a  device  for  taking 
care  of  losses  and  renewals  of  property  gradually  in  advance  out  of  the  profits  of  the  business  during  the 
time  that  the  depreciation  in  fact  is  actually  taking  place.  If  this  were  not  done,  the  time  would  even- 
tually come  when  a  costly  property,  though  on  the  books  at  its  original  cost,  would  be  as  a  matter  of  fact 
worthless.  To  replace  it  with  new  property  would  occasion  such  a  heavy  outlay  that  the  business,  although 
in  good  condition,  might  not  be  able  to  pay  profits  for  years. 

The  plan  of  carrying  a  Reserve  for  Depreciation  account  is  far  better  than  that  of  "writing  off"  peri- 
odical amounts  from  the  inventory.  When  the  reserve  account  is  carried,  the  original  cost  of  the  property 
shows  in  the  property  account  unaltered  by  charges  for  repairs  and  replacements  or  by  changes  caused 
by  writing  off  depreciation.  The  repairs  and  replacements  are  charged  to  the  Reserve  for  Depreciation 
account,  when  such  an  account  is  kept,  and  do  not  show  in  the  property  account. 

If  a  property  inventory  should  be  written  down  to  less  than  the  real  value  of  the  property  (and  most 
conservative  business  men  depreciate  property  inventories  rapidly),  it  would  make  a  showing  on  the  books 
which  might  be  prejudicial  to  the  best  interests  of  the  proprietor  if  he  should  wish  to  sell  the  property, 
or  if  the  property  should  be  destroyed  by  fire  and  it  should  become  necessary  to  prove  its  value  to  the 
insurance  adjusters,  or  if  the  proprietor  should  desire  to  borrow  money  on  the  property,  or  if  any  other 
situation  should  arise  in  which  it  might  be  desired  that  the  book  valuation  of  the  property  should  not 
appear  too  small. 


COST   OF   GOODS    SOLD  207 

3.  Inventories  of  expense  items  and  interest  items  need  only  be  computed,  but  it  must  be  known 
what  they  are  and  where  and  how  to  find  them.  Their  existence  as  inventories  is  a  matter  of  fact  with 
which  the  alert  bookkeeper  should  be  conversant,  and  if  he  does  not  know  of  their  existence  he  should 
be  sharp  enough  to  discover  them  through  an  examination  of  cash  book  and  bill  book  items  and  of  previous 
inventories.  If  the  cash  book  shows  coal  and  stamps  purchased,  or  last  month's  inventories  show  items 
on  hand  which  had  been  charged  to  expense,  he  should  determine  by  an  examination  of  the  premises 
whether  any  of  these  items  are  still  on  hand. 


RESERVE   FOR  BAD   DEBTS 

In  order  to  provide  against  the  loss  of  a  certain  jjer  cent  of  the  accounts  receivable  as  uncollectible 
a  reserve  is  sometimes  created  under  the  title  "Reserve  for  Bad  Debts."  This  reserve  is  created  out  of 
profits,  the  Loss  and  Gain  account  (or  Profit  and  Loss  account,  as  it  is  sometimes  called)  being  debited 
and  Reserve  for  Bad  Debts  being  credited,  for  an  amount  sufficient  to  provide  for  losses  of  this  kind.  When 
an  account  is  found  to  be  uncollectible,  it  is  closed  by  an  entry  charging  its  balance  to  Reserve  for  Bad 
Debts. 

Problem  16.  Trial  Balance.  Cash,  $2040.00;  Lands,  $9000.00;  Machinery,  $7000.00;  Tools,  $1500.00; 
Mdse  Inventory,  $4500.00;  Mdse  Costs,  $11000;  Sales,  $30500.00;  Sales  Returns,  $230.00;  Discount 
&  Allowances  on  Sales,  $G00.00;  Wages,  $6000.00;  Freight  &  Express,  $800.00;  Salaries,  $3200.00; 
Taxes,  $450.00;  Rents,  Cr.  $150.00;  E.xpense,  $800.00;  Accounts  Receivable,  $5030.00;  Accounts 
Payable,  $1500.00;  Capital,  $20000.00. 

Open  accounts  as  above.  Create  a  Reserve  for  Depreciation  account.  Make  a  journal  entry  pro- 
viding for  depreciation  as  follows:  Machinery,  5%;  Tools,  20%,  Provide  a  reserve  of  $100.00  for  bad 
debts  (journal  entry).  Having  failed  to  collect  from  H.  J.  Jones  $30.00  which  he  owes  us  on  accoimt, 
charge  this  item  to  the  Reserve  for  Bad  Debts  account,  crediting  Accounts  Receivable.  Post  the  fore- 
going entries,  opening  whatever  new  accounts  are  necessary.     Also  open  a  Mdse-General  account. 

The  Inventory  of  Mdse  at  closing  is  $8500.00.  Expenses  amounting  to  $110.00  have  been  incurred 
for  which  bills  have  not  been  received.  We  estimate  that  discounts  will  be  allowed  on  outstanding  sales 
accounts  amounting  to  $40.00.  Prepare  statements,  bearing  in  mind  that  the  Sales  Returns,  and  Dis- 
count &  Allowances  accounts  are  subordinate  to  the  Mdse  Sales  account;  the  Mdse  Inventory,  Freight  & 
Express,  and  Wages  accounts  are  subordinate  to  the  Mdse  Costs  account;  the  Mdse  Sales  and  Mdse  Costs 
accounts  are  subordinate  to  the  Mdse-General  account;  the  Salaries,  Taxes,  and  Rents  accounts  are  sub- 
ordinate to  the  Expense  account;  the  two  reserve  accounts  are  classed  with  the  capital  in  the  Profit  & 
Loss  statement  since  they  are  really  profits  which  instead  of  being  closed  to  capital  have  been  reserved 
for  special  purposes.  The  net  profit  may  be  called  L^nreserved  Profit.  Close  the  ledger  accounts,  closing 
all  subordinate  accounts  named  above  into  the  accounts  to  which  they  are  subordinate,  then  closing  Mdse- 
General  and  Expense  into  Profit  and  Loss,  then  closing  Profit  &  Loss  into  capital.  Prepare  a  trial  balance 
as  after  closing. 

COST   OP   GOODS   SOLD.     PERCENTAGE   OF   PROFIT 

Problem  17.  What  was  the  cost  of  the  goods  sold,  in  problem  16  ?  What  was  the  percent  of  profit 
on  Mdse  (based  upon  cost  of  goods  sold)  ?  What  percent  must  goods  be  marked  above  cost  to  cover 
expenses?  How  much  should  the  proprietor,  in  problem  16,  receive  net  for  an  article  costing  (not  in- 
cluding freight)  $5.00,  in  order  to  cover  original  cost,  freight,  the  net  expenses  of  the  business,  and  de- 
preciation on  tools  and  machinery,  and  to  make  20%  ?  Assuming  that  he  loses  5%  of  the  sale  price  in 
discounts  and  allowances  and  that  he  has  to  set  aside  2%  of  his  accounts  receivable  to  cover  bad  debts, 
how  much  must  his  selling  price  on  the  above  article  be  ? 

Problem  18.  Merchandise  purchases,  $15640.00;  merchandise  sales,  $11976.00;  inventory  at  clos- 
ing, $8850.00.     Required  the  cost  of  the  goods  sold. 

Problem  19.  Merchandise  purchases,  $26800.00;  merchandise  sales,  $32500.00;  inventory  at  clos. 
ing,  $8900.00.     Required  the  percent  of  gain  on  the  cost  of  the  goods  sold. 

Prablem  20.  Inventory  at  beginning,  $3290.50;  merchandise  purchases,  $8976.30;  merchandise 
sales,  $9849.60;  inventory  at  closing,  $5243.30.     Required  the  percent  of  gain  on  the  cost  of  the  goods  sold 


208 


SUPPLEMENTARY   PROBLEMS 


Problem  21.     Journalize  and  post  the  following: 

Jan.  1,  19 — .     A  began  business  with  $5000.00  in  cash. 

Jan.  2.     He  paid  $3000.00  for  Mdse,  in  cash. 

Jan.  3.     He  sold  half  of  his  Mdse.  for  $2000.00  cash. 

Jan.  4.     He  sold  the  remainder  of  his  Mdse  to  B  for  $1400.00,  receiving  two  notes  for  $700.00  each. 

Show  trial  balance  and  statements  Jan.  31,  assuming  that  interest  has  accrued  on  one  note  amount- 
ing to  $3.15,  and  estimating  $2.63  discount  on  the  other  note. 

Of  the  four  transactions  in  the  foregoing,  two  involve  neither  gain  nor  loss,  one  involves  a  gain,  and 
one  a  loss.  Of  the  two  inventories,  one  represents  gain,  and  the  other  represents  loss.  Read  the  fourth 
and  fifth  paragraphs  from  the  bottom,  page  61,  Part  I,  and  then  analyze  the  above  transactions.  Explain 
why  the  difference  between  the  assets  and  liabilities  exactly  equals  the  difference  between  the  losses  and 
gains,  using  the  foregoing  transactions  to  illustrate  your  argument.  / 


WEEKLY  PAYROLLS 


V 


Large  factories  and  other  business  concerns  employing  many  workmen,  find  it  desirable  to  install 
a  regular  payroll  system,  usually  requiring  the  services  of  a  time  clerk  (or  using  a  time  register)  and  a 
paying  clerk.  As  it  is  desirable  to  have  each  workman's  envelope  ready  to  be  handed  to  him,  the  time 
and  pay  sheet  should  show  the  exact  change  required  for  each. 


TIME    AND    PAY 

8HEE1 

No. 

Name 

M. 

T. 

W. 

Th. 

F. 

s. 

Total 
Hours 

Rate 

Total 
Due 

sio 

S5 

J2 

$1 

5(V 

25f* 

10^ 

5^ 

U 

1 

Jas.  Strong 

10 

5 

10 

10 

10 

10 

55 

30^ 

$16.50 

1 

1 

1 

1 

2 

L.  L.  Williams 

8 

10 

10 

10 

10 

8 

56 

25^ 

14.00 

1 

2 

3 

Frank  Burns 

5 

10 

10 

5 

10 

7 

47 

20^ 

9.40 

1 

2 

1 

1 

1 

4 

Geo.  Morris 

10 

10 

10 

10 

10 

10 

60 

27^ 

16.20 

1 

1 

1 

2 

5 

Jno.  Gray 

10 

10 

10 

7 

4 

5 

46 

50^ 

23.00 

2 

1 

1 

$79.10 

5 

3 

5 

3 

1 

1 

3 

1 

Note  that  the  device  at  the  right  for  showing  exact  change  also,  by  its  totals,  furnishes  a  check  upon 
the  accuracy  of  the  payroll  total.  Rule  a  form  similar  to  the  above  and  prepare  a  weekly  time  and  pay 
sheet  for  the  Cummins  Mfg.  Co.  for  the  week  ending  May  16,  19 — ,  from  the  following  data  furnished  by 
the  time  clerk.     Always  use  the  smallest  number  of  pieces,  in  figuring  change. 

Problem  22.  Geo.  Gannon:  Monday,  10  hrs.;  Tuesday,  8  hrs.;  Wednesday,  8  hrs.;  Thursday,  8  hrs. ; 
Friday,  10  hrs.;  Saturday,  10  hrs.;  wages  per  hour,  25^.  William  King:  Monday,  10  hrs.;  Tuesday,  10 
hrs.;  Wednesday,  10  hrs.;  Thursday,  10  hrs.;  Friday,  10  hrs.;  Saturday,  5  hrs.;  wages  per  hour,  22^.  John 
Warner:  Monday,  10  hrs.;  Tuesday,  9  hrs.;  Wednesday,  10  hrs.;  Thursday,  10  hrs.;  Friday,  10  hrs.;  Satur- 
day, 10  hrs.;  wages  per  hour,  20^.  Edgar  Thomas:  Monday,  10  hrs.;  Tuesday,  5  hrs.;  Wednesday,  10  hrs.; 
Thursday,  9  hrs.;  Friday,  9  hrs.;  Saturday,  9  hrs.;  wages  per  hour,  24 <S.  Gus  Erickson:  Monday,  10  hrs.; 
Tuesday,  0  hrs.;  Wednesday,  10  hrs.;  Thursday,  8  hrs.;  Friday,  10  hrs.;  Saturday,  10  hrs.;  wages  per  hour, 
20^.  Chas.  O'Neil:  Monday,  10  hrs.;  Tuesday,  10  hrs.;  Wednesday,  10  hrs.;  Thursday,  6  hrs.;  Friday, 
10  hrs.;  Saturday,  5  hrs.;  wages  per  hour,  17^^.  Will  Naegele:  Monday,  8  hrs.;  Tuesday,  10  hrs.;  Wednes- 
day, 10  hrs.;  Thursday,  8  hrs.;  Friday,  10  hrs.;  Saturday,  5  hrs.;  wages  per  hour,  20^.  Con  Goettig:  Mon- 
day, 10  hrs.;  Tuesday,  10  hrs.;  Wednesday,  5  hrs.;  Thursday,  10  hrs.;  Friday,  8  hrs.;  Saturday,  5  hrs.; 
wages  per  hour,  28^.  Frank  Ryan:  Monday,  9  hrs.;  Tuesday,  9  hrs.;  Wednesday,  9  hrs.;  Thursday,  9 
hrs.;  Friday,  9  hrs.;  Saturday,  9  hrs.;  wages  per  hour,  30^.  Fred  Ristau:  Monday,  10  hrs.;  Tuesday,  10  hrs.; 
Wednesday,  8  hrs.;  Thursday,  8  hrs.;  Friday,  8  hrs.;  Saturday,  5  hrs.;  wages  per  hour,  22^.  Geo.  Bates: 
Monday,  7  hrs.;  Tuesday,  10  hrs.;  Wednesday,  10  hrs.;  Thursday,  10  hrs.;  Friday,  0  hrs.;  Saturday,  5  hrs.; 
wages  per  hour,  28^.  John  Brown:  Monday,  10  hrs.;  Tuesday,  10  hrs.;  Wednesday,  10  hrs.;  Thursday, 
10  hrs.;  Friday,  6  hrs.;  Saturday,  5  hrs.;  wages  per  hour,  18^.  Frank  Long:  Monday,  10  hrs.;  Tuesday, 
10  hrs.;  Wednesday,  4  hrs.;  Thursday,  8^  hrs.;  Friday,  10  hrs.;  Saturday,  5  hrs.;  wages  per  hour,  20^. 
Vincent  Daly:  Monday,  10  hrs.;  Tuesday,  5  hrs.;  Wednesday,  10  hrs.;  Thursday,  10  hrs.;  Friday,  10  hrs.; 
Saturday,  0  hrs.;  wages  per  hour,  17^^.     Albin  Corkell:  Monday,  10  hrs.;  Tuesday,  10  hrs.;  Wednesday, 


BORROWING   MONEY  209 

7  hrs.;  Thursday,  7  hrs.;  Friday,  10  hrs.;  Saturday,  10  hrs.;  wages  per  hour,  27|^.  Tom  Calkins:  Mon- 
day, 10  hrs.;  Tuesday,  5  hrs.;  Wednesday,  10  hrs.;  Thursday,  10  hrs.;  Friday,  10  hrs.;  Saturday,  0  hrs.; 
wages  per  hour,  15<i. 

BORROWING   MONET  [/ 

The  individual  who  makes  a  practice  of  borrowing  money  is  often  an  improvident  fellow,  who  is  not 
really  entitled  to  the  consideration  which  he  solicits.  In  business,  however,  borrowing  money  is  not  a 
discreditable  performance,  nor  does  it  carry  with  it  any  implication  of  lack  of  financial  responsibility. 
The  soundest  financial  institution  at  times  finds  a  temporary  cash  loan  to  be  a  great  business  convenience 
and  the  very  fact  that  it  is  soimd  financially  enables  it  to  secure  the  loan. 

Suppose  that  a  perfectly  solvent  concern  finds  all  its  assets  tied  up  in  investments,  with  only  a  small 
amount  (say  $250.00)  of  ready  cash  on  hand.  Suppose  that  invoices  payable  exist  amounting  to  $2000.00 
upon  which  cash  discounts  of  2%  to  10%  can  be  saved.  The  manager  who  would  overlook  this  oppor- 
tunity to  save  $40.00  to  $200.00  by  borrowing  $2000.00  temporarily  would  not  be  wise.  Interest  on  $2000.00 
for  a  short  time  would  be  a  very  small  item  compared  with  the  saving  on  discounts. 

Money  can  be  secured  for  emergencies  without  borrowing.  Notes  receivable  can  be  discounted; 
accounts  receivable  can  be  assigned;  merchandise  can  be  sold  at  a  great  reduction;  property  of  all  kinds 
can  be  sold.  But  in  any  of  the  above  cases  the  loss  will  usually  be  far  greater  than  the  cost  of  interest 
on  money  borrowed. 

Problem  23.  Financial  Statement,  Jan.  1,  19 — .  Assets:  Cash,  $250.00;  Real  Estate,  $10000.00; 
Furniture  &  Fixtures,  $1250.00;  Merchandise  Inventory,  $9000.00;  Notes  Receivable,  $1500.00,  with 
accrued  Interest,  $27.50;  Accounts  Receivable,  $2500.00.  Liabilities:  Mortgages  Payable,  $50Q0.00;  Notes 
Payable,  $1000.00;  Accounts  Payable,  $2000.00. 

Make  journal  entries  for  the  following: 

The  proprietor,  wishing  to  raise  $10000.00  more  in  cash  at  once,  discounted  two  notes  receivable,  one 
a  90-day  note  for  $600.00  at  4%  dated  60  days  ago,  one  a  30-day  note  for  $500.00  at  5%  dated  20  days 
ago;  the  rate  of  discount  in  each  case  was  0%.  He  then  assigned  $2000.00  of  his  accounts  receivable,  dis- 
counting them  at  5%.  He  then  held  a  bargain  sale  of  merchandise,  and  sold  goods  at  10%  below  cost 
until  he  had  raised  the  rest  of  the  $10000.00.  His  expenses  during  the  month  required  for  this  work  were 
$220.00,  cash.  What  did  it  cost  him  to  realize  $10000.00  on  his  assets  in  this  manner?  Show  a  state- 
ment of  his  financial  condition  after  the  above  entries  were  posted  and  closed,  inventories  being:  Mdse 
$****.**;  Interest  Receivable,  $25.00;  other  inventories  unchanged. 

Problem  24.  If  instead  of  trying  to  realize  on  his  assets  by  direct  sale,  the  proprietor  in  the  preced- 
ing problem  had  given  a  second  mortgage  upon  his  real  estate  for  $2500.00,  payable  in  30  days  at  5%, 
receiving  the  $2500.00  in  cash;  had  given  a  chattel  mortgage  upon  his  stock  of  merchandise  for  $5000.00, 
payable  in  30  days  at  6%,  receiving  the  $5000.00  in  cash;  and  had  secured  the  balance  of  the  $10000.00 
from  the  First  National  Bank,  giving  his  note  due  in  30  days  for  an  amount  which  discounted  at  5%  would 
yield  him  the  desired  balance  in  cash;  what  would  it  have  cost  him  to  realize  $10000.00  cash  in  this 
manner?  Journalize  the  entries  necessary  for  the  above  transactions.  Post  them.  Show  a  statement  of 
condition  after  the  $10000.00  was  realized,  interest  receivable  inventory  being  $27.50.  Aside  from  the 
fact  that  by  this  plan  the  money  is  raised  thirty  days  earlier,  is  it  preferable  to  the  plan  suggested  in  the 
preceding  problem,  or  not?     Why? 

Note: — In  order  to  borrow  $2500.00  from  the  bank  on  his  note  without  specific  security  it  was  neces- 
sary to  schedule  all  his  assets  and  liabilities.  Show  this  schedule.  The  schedule,  in  form,  should  be  pre- 
pared about  as  follows:  It  should  be  addressed  to  the  bank,  as  an  application  for  a  loan  of  $2500.00.  This 
application  should  be  immediately  followed  by  the  statement  of  assets  and  liabilities.  Below  this  should 
be  a  statement  of  the  amount  of  contingent  hability  outstanding  against  the  firm  (in  this  case,  none)  and 
a  statement  of  the  insurance  carried  (in  this  case  $6000.00  on  real  estate  and  $8000.00  on  Merchandise 
and  Furniture  &  Fixtures).  This  should  be  followed  by  a  statement  of  important  facts  in  regard  to  the 
personnel  of  the  partners,  the  relation  of  each  to  the  business,  etc.  (which  facts  you  may  omit  from  this 
schedule),  and  the  signature,  for  which  you  may  use  your  own  name. 

RECONCILIATION  V 

Reconciliation  is  the  general  term  applied  to  the  process  of  showing  the  agreement  between  two  accoimts 
or  statements  which  should  agree,  by  supplying  the  items  missing  from  one  or  the  other,  or  otherwise 


210  SUPPLEMENTARY   PROBLEMS 

explaining  seeming  discrepancies  between  them.  A  familiar  instance  of  this  is  the  reconciliation  of  the 
bank  statement  with  the  balance  shown  by  the  check  book  stub.  You  have  already  learned  how  this 
is  done. 

Problem  25.  On  Mar.  1,  the  bank  statement  showed  a  balance  of  $850.60,  three  checks  being  still 
unpaid  of  $25.00,  $37.50,  and  $27.60.  On  Apr.  1,  the  check  book  stub  showed  a  balance  of  $759.60,  the 
check  for  $27.60  being  still  unpaid,  as  well  as  two  checks  which  were  issued  during  March  for  $10.00  and 
$15.67  respectively.  What  was  the  balance  of  the  check  book  stub  on  March  1?  What  was  the  balance 
of  the  bank  statement  on  April  1? 

INVESTMENTS 

It  is  a  good  plan  to  invest  capital  that  is  not  being  used,  in  good  securities,  preferably  in  something 
that  can  be  realized  upon  quickly  if  the  funds  invested  in  it  are  suddenly  needed  in  the  business.  Well- 
secured  bonds  might  for  this  reason  be  preferred  to  stocks  or  to  real  estate,  or  mortgages,  the  value  of  stocks 
being  somewhat  uncertain,  and  it  being  sometimes  difficult  to  realize  upon  real  estate  or  mortgages  quickly. 

Problem  26.  A  has  $5000.00  invested  in  City  Railway  5%  bonds.  He  needs  $1000.00  cash  for  30 
days  and  can  secure  it  at  4%  by  giving  the  bonds  as  security.  How  much  does  he  gain  by  borrowing 
instead  of  selling  $1000.00  worth  of  the  bonds? 

Problem  27.  B  has  $2000.00  in  the  savings  bank  on  March  1,  19 — .  The  money  has  been  on  deposit 
at  4%  for  two  months,  but  no  interest  will  be  paid  on  any  money  withdrawn  before  the  end  of  the  third 
month.  He  purchases  goods  invoicing  at  $1000.00  on  the  terms  2/10  n/30.  He  has  a  choice  of  three 
plans:  (a)  He  may  let  the  bill  run  30  days,  (b)  In  ten  days  he  may  withdraw  from  the  savings  bank 
enough  money  to  pay  the  net  amount  due  on  the  bill,  (c)  He  may  borrow  the  money  from  the  bank  for 
20  days,  giving  his  note  for  an  amount  which  will  yield  him  the  cash  he  needs,  at  5%  bank  discount,  after- 
wards discounting  the  bill.  Make  the  entries  required  for  each  of  the  three  plans.  Which  is  the  best 
plan?     How  much  better  is  it  than  each  of  the  other  plans? 

CHARGES   TO   EXPENSE  AND   TO   CAPITAL 

It  is  always  an  important  question  whether  to  charge  a  given  item  to  an  expense  account  or  to  an 
asset  account.  Take  for  instance  repairs:  Shall  $50.00  paid  for  repairs  to  a  building  be  charged  to  expense 
or  to  real  estate?  In  the  former  case  the  item  will  quickly  find  its  way  into  the  Loss  &  Gain  accoimt; 
in  the  latter  case  it  will  be  shown  on  the  books  as  an  increase  in  the  value  of  the  real  estate,  and  in  order 
to  get  it  into  the  Loss  &  Gain  account.  Real  Estate  will  have  to  be  closed  to  Loss  &  Gain. 

This  question  is  of  grave  importance  when  depreciation  is  cared  for  through  reserve  accounts  and 
the  property  accounts  are  not  closed  to  Loss  &  Gain,  for  such  an  item  as  the  above  if  charged  to  Real 
Estate  would  stand  as  an  asset  although  it  really  had  not  increased  the  asset. 

The  question  becomes  vital  when  the  business  is  run  by  a  manager  who  shares  in  the  current  profits, 
but  has  no  interest,  or  only  a  small  interest  in  the  assets  of  the  concern. 

Problem  28.  C  is  manager  for  D.  He  owns  no  share  in  the  assets,  and  is  responsible  for  no  losses, 
but  he  gets  50%  of  the  gains.  He  replaces  three  office  desks  which  are  worn  out  with  three  new  ones 
costing  $60.00  each  and  charges  the  Furniture  account,  in  which  the  old  office  desks  appear  at  $30.00 
each,  the  price  at  which  they  were  inventoried  when  he  took  charge  of  the  busihess.  At  the  end  of  the 
year  he  submits  a  statement  of  profits  which  shows  that  $2560.00  is  due  him.  To  how  much  is  he  really 
entitled? 

BOOK  VALUES   AND   ACTUAL   VALUES 

If  a  bookkeeper  writes  off  too  much  or  too  little  depreciation  from  the  values  of  property,  or  if  the 
market  rises  or  drops  so  that  values  are  materially  affected,  there  is  a  difference  between  what  his  books 
say  his  properties  are  worth  and  what  they  are  actually  worth.  Many  instances  might  be  cited  of  the 
difference  between  book  values  and  actual  values.  When  a  bookkeeper  makes  a  statement  of  the  condi- 
tion of  a  business,  if  it  is  not  practicable  to  correct  the  books  so  that  they  will  show  true  values,  he  should 
always  make  notes  of  the  true  facts  in  his  statement. 

Problem  29.  J.  C.  Evans  bought  out  F.  L.  Bewick  for  $10000.00  on  April  1,  19 — ,  and  found  the 
following  assets  and  liabilities  shown  on  the  books:  Real  Estate,  $6500.00;  Furniture  &  Fixtures,  $1000.00; 
Merchandise  (Invty),  $2780.00;  Accounts  Receivable,  $2500.00;  Accounts  Payable,  $3500.00;  F.  L.  Bewick, 
$9280.00.  Open  these  ledger  accounts,  and  test  the  balance  of  the  ledger.  Make  a  journal  entry  for  the 
purchase  of  the  business  by  J.  C.  Evans,  no  Goodwill  account  being  opened. 


THE   SUSPENSE   ACCOUNT  211 

Mr.  Evans  makes  a  revaluation  of  the  inventories  as  follows:  Real  Estate,  $7000.00;  Furniture  & 
Fixtures,  $750.00;  Merchandise,  $2500.00  (These  are  the  prices  at  which  he  bought  them  of  Mr.  Bewick). 
Make  journal  entries  adjusting  the  balances  of  the  foregoing  accounts.  During  March  Mr.  Evans  had 
secured  from  every  customer  but  one  an  acknowledgment  of  his  indebtedness;  this  customer  repudiated 
a  bill  amounting  to  $50.00  and  Mr.  Evans  decided  not  to  press  the  claim;  make  a  journal  entry.  Post 
all  the  above  entries,  balance  the  accounts,  and  show  a  new  trial  balance. 

THE   SUSPENSE   ACCOUNT  [^ 

The  term  ''suspense,"  as  used  in  bookkeeping,  has  both  a  general  and  a  special  meaning.  In  general, 
the  term  is  applied  to  all  accounts  which  are  temporarily  set  aside  out  of  the  general  ledger.  Suppose 
a  merchant  has  several  accounts  receivable  the  collection  of  which  he  considers  doubtful  (Not  "bad" 
accounts,  for  these  are  actually  written  off  the  books).  He  sets  these  aside,  "in  suspense,"  by  taking 
them  out  of  the  ledger  and  placing  them  in  a  separate  ledger  for  suspense  accounts.  In  their  place  in 
the  principal  ledger  he  places  a  "Suspended  Accounts"  account,  which  he  may  depreciate  as  he  deems 
advisable,  so  that  the  ledger  will  show  only  the  collectable  accounts  as  assets.  The  suspended  accounts 
remain  intact  in  the  ledger,  which  is  now  merely  a  memorandum  ledger.  This  is  one  illustration  of  the 
general  use  of  the  term  "suspense."     Its  special  use  is  described  in  the  following  paragraph. 

An  account  is  sometimes  carried  in  the  ledger  called  the  Suspense  account,  into  which  are  carried 
miscellaneous  items  which  the  bookkeeper  cannot  immediately  dispose  of  in  their  proper  accounts.  Dis- 
crepancies in  trial  balances,  shortages  or  overs  in  cash,  items  of  debit  or  credit  which  the  bookkeeper  wishes 
to  hold  suspended  until  the  manager  advises  him  what  accoimt  to  post  them  to,  etc.,  are  carried  to  the 
Suspense  account.  When  the  discrepancy,  shortage,  or  over  is  found,  or  the  difficulty,  whatever  it  is, 
is  solved,  the  bookkeeper  must  make  an  entry  taking  the  item  out  of  the  Suspense  account,  and  making 
a  final  and  proper  disposition  of  it. 

The  following  problem  is  given  because  it  is  believed  that  the  student  should  know  something  about 
the  Suspense  account,  what  it  is  and  how  to  use  it.  But  the  student  cannot  be  too  strongly  cautioned 
in  regard  to  its  use.  Entries  to  Suspense  should  never  be  resorted  to  except  in  cases  of  extreme  necessity, 
and  many  hold  that  it  is  better  not  to  have  such  an  account  in  the  ledger  at  all,  as  it  is  a  convenience 
too  likely  to  be  abused.  Generally  speaking,  the  safe  plan  would  be  to  solve  all  bookkeeping  difficulties 
at  the  time  of  their  occurrence,  making  final  disposition  of  them  at  that  time;  the  Suspense  account  offers 
a  constant  temptation  to  "put  off"  difficulties. 

Problem  30.  Open  a  Suspense  account  and  enter  in  it  the  debits  and  credits  which  should  go  to 
it  in  the  following  transactions: 

June  4,  19 — .     Cash  was  found  to  be  $5.00  short. 

June  5.  Paid  a  carpenter  $20.00  upon  completion  of  some  wall  shelves  and  the  bookkeeper  did 
not  know  whether  to  charge  Real  Estate  or  Fixtures. 

June    7.     $10.00  too  much  was  found  in  the  cash  drawer. 

June    9.     The  proprietor  advised  the  bookkeeper  to  charge  the  item  of  June  5  to  Real  Estate.    Why? 

June  31.  Mrs.  Smith,  a  customer,  indignantly  declared  that  her  bill  for  the  month  was  $10.00  too 
large.     She  stated  that  she  had  paid  this  amovmt  on  June  7,  but  had  not  been  credited  for  it. 

June  31.  The  proprietor  instructed  that  the  cash  shortage  of  June  4  be  charged  to  Loss  &  Gain,  as 
it  had  not  been  accounted  for. 

June  31.     The  trial  balance  was  "off,"  the  debit  side  being  $7.20  larger  than  the  credit  side. 

Feb.  5.  The  bookkeeper  finally  discovered  the  error  in  the  trial  balance.  A  charge  against  D.  W 
Adams  on  June  20  had  been  entered  as  $8.00  instead  of  80^. 

CHECKING  DEBITS  AGAINST  CREDITS 

A  system  for  checking  credits  against  debits  in  the  sales  ledger  is  suggested  in  the  following  problem. 
This  system  could  also  be  used  in  the  purchase  ledger.  Note  that  the  folio  columns  are  used  for  check- 
ing instead  of  page  references.     Explain  why  the  page  references  are  unnecessary. 

Problem  31.  Open  an  account  with  The  L.  D.  Smith  Grocery  Co.,  using  ordinary  ledger  paper  with 
one  debit  column  and  one  credit  column.  Enter  the  following  charges  (all  but  one  are  for  Mdse):  July 
2,  19—,  $30.85;  July  3,  $3.10;  July  4,  $4.50;  July  5,  $5.20;  July  6,  $3.18;  July  7,  $8.26;  July  9,  $9.64;  July 


212  SUPPLEMENTARY   PROBLEMS 

10,  Freight  Advanced  as  per  CB7,  $5.34;  July  12,  $4.63;  July  13,  $5.82;  July  14,  $27.82;  July  16,  $12.25; 
July  18,  $13.24;  July  19,  $17.62.  On  July  5,  a  cash  payment  was  made  to  cover  items  of  July  2  and  3. 
Make  the  entry  on  the  credit  side  of  the  ledger.  Check  in  the  folio  columns  opposite  the  credit  entry  and 
the  two  debits  it  covers,  using  the  check  figure  1  in  all  three  places.  On  July  11  a  cash  payment  was 
made  covering  the  debits  of  July  4,  5,  6,  and  7.  Make  the  entry  and  check  in  five  places,  using  the  check 
figure  2.  On  July  12  a  cash  payment  of  $9.64  was  made  to  cover  the  debit  of  July  9.  Enter,  and  check 
in  two  places,  using  the  check  figure  3.  On  July  13  a  credit  of  $2.34  was  made,  which  checks  against 
nothing.     On  July  18,  a  cash  payment  of  $50.52  was  made  to  cover  the  bills  of  Sept.  12,  13,  14,  and  16. 

Quickly  determine  the  balance  by  adding  the  unchecked  debits,  and  deducting  the  amount  of  the 
unchecked  credit.  Does  this  agree  with  the  balance  you  secure  by  taking  the  difference  between  the 
totals  of  the  two  sides  in  the  usual  way? 

Note: — Dates  or  checkmarks  could  have  been  used  in  the  c?iecking  column  in  the  foregoing  problem; 
instead  of  check  numbers. 

COMPARATIVE   STATEMENTS 

There  are  so  many  ways  in  which  comparative  statements  may  be  prepared,  depending  upon  the 
comparisons  desired  to  be  shown,  that  a  full  discussion  of  the  subject  would  require  a  volume.  Follow- 
ing is  an  illustration  of  a  form  prepared  to  show  a  comparison  of  the  assets  and  liabilities  on  a  given  date 
with  the  same  items  one  year  previous. 

Problem  32. 

COMPARATIVE   STATEMENT   OF   CONDITION  AT  CLOSE   OF   BUSINESS   DEC.  31 

Resources 

1910  1911 

Cash 1000.00  1059.60 

Real  Estate 9000.00  9000.00 

Fum.  &  Fix 2500.00  2500.00 

Mdse  Invty 7500.00  9750.50 

Notes  Eec 1000 .00  1500 .00 

Accts.  Rec 3500 .00  4000 .00 

Total 24500.00  27810.10 

lAabHities 

Notes  Pay 2000 .00  1000 .00 

Accts  Pay 3500.00  3000.00 

Reserves 

Res.  for  Depr.  on  R.  E 450 .00  675.00 

Res.  for  Depr.  on  F.  &  F 500 .00  550 .00 

Res.  for  Bad  Debts 125.00  140.00 

Capital  and  Profits 

Undivided  Profits 2925.00  7445.10 

Capital 15000.00  15000.00 

.  24500.00       27810.10 

Note: — The  above  is  the  statement  of  a  corporation.  It  is  customary  in  such  statements,  for  reasons 
which  you  will  understand  when  you  study  Modern  Corporation  Accounting,  to  add  capital,  profits,  and 
reserves  to  liabilities,  making  a  balanced  statement.  Show  the  profits  between  Dec.  31,  1910,  and  Dec. 
31,  1911,  in  three  ways. 

INCOME   OR  REVENUE   STATEMENTS 

The  Loss  and  Gain  statement  is  also  variously  called  the  Profit  and  Loss  statement,  the  Income  and 
Expenditure  statement,  the  Revenue  statement,  etc.,  etc.  While  custom  has  not  indicated  clean-cut 
distinctions  in  the  uses  of  the  foregoing  terms,  it  would  seem  that  the  two  former  are  more  appropriately 
used  by  mercantile  or  manufacturing  concerns,  which  buy  or  manufacture  articles  of  merchandise  and 
sell  them,  while  the  two  latter  terms  should  be  used  by.  concerns  which  maintain  and  sell  services  or  accom- 
modations of  some  kind,  no  tangible  commodity  being  handled:    A  man  working  on  a  salary  of  $1800.00 


MISCELLANEOUS    PROBLEMS  213 

might  properly  call  that  salary  his  "income,"  because  it  is  the  amount  which  comes  in  to  him;  but  it 
would  be  manifestly  improper  for  a  merchant  who  sells  $100,000.00  worth  of  goods  a  year  to  speak  of 
this  amount  as  his  income.  It  is  equally  improper  to  speak  of  the  balance  remaining  after  costs  and 
expenses  are  paid  as  "income" — it  is  properly  called  his  "gain"  or  "profit." 

"Income"  or  "Revenue"  are  terms  properly  used  by  railroad  concerns,  theaters,  clubs,  taxing  bodies, 
and  by  other  concerns  disposing  of  services,  accommodations,  or  other  things  for  which  definite  intrinsic 
values  cannot  be  assigned  to  each  separate  thing  disposed  of.  If  I  sell  you  a  hat,  after  having  sold  two 
hundred  hats,  I  am  parting  with  specific  value  which  I  would  not  part  with  if  you  should  not  buy  the 
hat.  But  if  I  sell  you  a  ticket  to  my  theater  after  I  have  sold  two  hundred  others,  I  have  not  parted  with 
any  value  for  you  specifically.  My  theatrical  performance  would  cost  me  just  the  same  whether  I  received 
the  extra  income  from  you  or  not. 

An  Income  statement  sets  forth  the  different  sources  and  amounts  of  income,  and  from  their  total 
deducts  the  total  of  the  expenses,  which  are  also  shown  in  detail. 
Problem  33. 

Income  Statement  of  the  B.  C.  Club 
General  Revenue: 

Dues $28000 .00 

Special  Fees 565 .  60 

Sub-Rentals 1000 .00  $29565.60 

Operation  of  Departments: 

Net  Income  from  Gaffe 5000 .00 

Net  Income  from  Gymnasium 1000 .00 

Net  Loss  on  Barber  Shop 500.00*  5500.00 

Total  Income 35065.60 

Expenses: 

Housekeeping  Expense 20000 .00 

Special  Appropriations 1569 .  17 

General  Expense 15060.00 

Total  Expense 36629 .  17 

Loss  on  Operation 1563 .  57 

Interest  on  Bonds , 4500 .00 

Total  Loss 6063.57 

Subtract*. 

Assuming  that  you  are  elected  a  member  of  the  Board  of  Directors  of  the  B.  C.  Club,  make  three  sug- 
gestions for  bettering  its  financial  condition. 

MISCELLANEOUS   PROBLEMS 

Problem  34.  On  Jan.  1,  1911,  A's  investment  account  shows  a  debit  balance  of  $343.75  after  clos- 
ing. His  Loss  &  Gain  Statement  of  Dec.  31,  1910,  shows  that  he  lost  $567.80  during  December.  His 
Loss  &  Gain  statement  of  Nov.  30  rfiows  a  gain  of  $205.00  for  November.  His  withdrawals  for  personal 
use  were  as  follows:  Nov.  15,  $20.00;  Nov.  25,  $25.00;  Dec.  10,  $30.00.  Show  his  ledger  account  from 
Nov.  1,  1910,  to  Jan.  1,  1911. 

Problem  35.  B's  capital  Jan.  1,  1910,  was  $8750.00,  which  Included  a  stock  of  Merchandise  worth 
$4500.00.  During  1910  his  purchases  of  Merchandise  amounted  to  $8600.00,  his  sales  amounted  to 
$8950.00,  his  expenses  were  $1260.00,  and  his  property  depreciations  aggr^ated  $150.00.  There  were 
no  losses  other  than  those  shown  by  his  expense  account  and  bis  property  account,  and  his  only  source 
of  profit  was  his  Merchandise  account.  On  Jan.  1,  1911,  his  capital  was  $9250.00,  and  he  had  withdrawn 
$750.00  for  personal  use  during  the  year.     Show  his  Merchandise  account  from  Jan.  1,  1910,  to  Jan.  1,  1911. 

Problem  36.  C's  sales  for  1910  amounted  to  $18000.00.  His  Merchandise  inventory  on  Dec.  31, 
1910,  was  $7500.00,  an  increase  of  $750.00  over  the  inventory  a  year  previous.  His  gain  on  Merchandise 
for  the  year  was  $5200.00.  Determine  the  amount  of  his  purchases  for  the  year-,  and  show  his  Merchan- 
dise account  from  Jan.  1,  1910,  to  Jan.  X,  1911. 

Problem  37.  D  keeps  a  journal,  sales  book,  cash  book,  and  loose-leaf  ledger.  On  Mar.  1,  he  lost 
page  105  from  his  ledger.  This  page  contained  the  account  of  W.  G.  Simpson.  Reference  to  the  monthly 
trial  balances  shows  that  Simpson  owed  $15.69  on  Jan.  1;  $30.50  on  Feb.  1;  $25.70  on  Mar.  1.     The  cash 


214  SUPPLEMENTARY   PROBLEMS 

book  shows  the  following  payments:  Jan.  15,  $10.00;  Jan.  25,  $42.60;  Feb.  15,  $27.75;  Feb.  20,  $15.60. 
The  journal  shows  that  he  gave  D  his  note  for  $50.00  on  Feb.  10.  What  were  the  sales  to  him  during 
January?     During  February  ?     How  would  you  proceed  to  write  up  his  account  in  full? 

Problem  38.  On  Dec.  31,  1910,  E's  ledger  showed  the  following  footings:  Cash,  $5000.00;  Mer- 
chandise, Dr.  $17500.00,  Cr.  $14000.00;  Expense,  $1250.60;  Accounts  Receivable,  $3750.00;  Accounts 
Payable,  $5000.00.  The  Merchandise  Inventory  on  Dec.  31  was  $6500.00.  If  E's  capital  on  Jan.  1,  1910, 
was  $12000.00,  how  much  has  he  withdrawn  during  the  year  for  personal  use?  Show  E's  ledger  account 
from  Jan.  1,  1910,  to  Jan.  1,  1911. 

Problem  39.  May  1,  19 — .  You  take  as  a  partner  C.  B.  Quincy,  one  of  your  creditors.  He  invests 
in  the  business  $3500.00,  the  amount  which  you  owe  him,  and  $5000.00  in  cash.  Make  the  journal  entry. 
If  your  own  investment  is  $12750.00,  in  what  proportion  should  the  profits  be  divided  between  you  and 
Mr,  Quincy,  assuming  that  profits  are  divided  in  proportion  to  investment? 

Problem  40.  A  bill  for  $1352.64,  dated  July  25,  1910,  is  subject  to  a  series  of  trade  discounts  of 
20,  16f ,  and  12^,  and  time  discounts  as  follows:  10  per  cent  30  days,  5  per  cent  60  days.  The  bill  is  paid 
August  30,  1910.     What  is  the  purchaser's  entry? 

Problem  41.  In  a  set  of  books  consisting  of  journal,  sales  book,  cash  book,  and  ledger,  indicate 
the  order  in  which  the  work  should  be  done,  including  the  closing  of  the  books. 

Problem  42.  Write  the  following  forms  using  the  current  date,  your  own  name  as  maker,  and  sup- 
plying other  data:  (a)  A  check  (b)  A  promissory  note  (c)  A  sight  draft  (d)  A  time  draft  (e)  An  invoice 
(f)  A  statement  of  account  (g)  A  credit  memorandum. 

Problem  43.  A  90-day  note  for  $398.42,  bearing  interest  at  6  per  cent,  dated  Sept.  21,  1910,  is  dis- 
counted at  a  bank  Oct.  31,  1910,  at  7  per  cent.     What  is  the  endorser's  entry? 

Problem  44.  R.  E.  Parker  and  C.  A.  Brown  began  business  July  1,  1911.  Parker  invested  as  fol- 
lows: Cash,  $2530.00;  Merchandise,  $4276.00;  Notes  Receivable,  $2250.00,  with  accrued  interest  for  35 
days  at  6%;  a  City  of  Chicago  bond  for  $1000.00  at  1|%  premium.  His  liabilities  are:  Notes  Payable, 
$1780.00,  with  accrued  interest  for  46  days  at  5%.  Brown  invests:  Cash,  $7500.00,  and  an  account 
against  L.  E.  Blake  for  $960.00.  The  latter  the  firm  accepts  at  15%  discount.  Make  the  opening  journal 
entries. 

Problem  45.  Give  argimients  in  favor  of  making  statements  before  closing  the  books,  rather  than 
after. 

Problem  46.  An  analysis  of  the  ledger  shows  the  following  items:  Goods  on  hand,  Jan.  1,  1910, 
$10000.00;  purchases  during  the  year,  $50000.00;  sales  during  the  year,  $60000.00;  purchases  returned, 
$3000.00;  sales  returned,  $7000.00;  freight  in,  $500.00;  freight  out,  $390.00;  value  of  goods  on  hand,  Jan. 
1,  1911,  $20000.00.     Find  the  per  cent  of  profit  on  merchandise  account. 

Problem  47.  The  following  merchandise  accounts  were  found  on  a  ledger:  Inventory  at  com- 
mencing, $5000.00;  purchases,  $21000.00;  sales,  $36000.00;  freight  in,  $360.00;  purchases  returned, 
$1500.00;  sales  returned,  $2,400.00.  The  inventory  at  closing  was  $3000.00.  What  per  cent  profit  was 
made  on  the  merchandise  account? 

Problem  48.  Trial  balance  of  the  X.  Y.  Z.  Co.  on  Jan.  1,  1910:  Cash,  $20,000.00;  Real  Estate, 
$7,500.00;  Mdse,  Dr.  $30,000.00;  Cr.  $10,000.00;  Expense,  $3,000.00;  Interest  &  Discount,  Cr.  $500.00; 
Notes  Rec,  $5,000.00;  Accts.  Rec,  $14,000.00;  Notes  Pay.,  $8,000.00;  Accts.  Pay.,  $7000.00;  Invest- 
ment, $54,000.  Additional  information:  Merchandise  unsold,  $26,000.00;  real  estate  on  hand  valued 
at  $6,000.00;  items  charged  to  expense  not  used,  $1,200.00;  wages  due  and  not  paid,  $300.00.  Make 
statements. 

Problem  49.  From  the  following  balances  and  inventory  (proprietor's  account  omitted)  determine, 
first,  the  investment;  second,  the  gain  or  loss;  third,  the  present  worth:  Cash  on  hand,  $5,286.92;  Mer- 
chandise, Dr.  $1,238.06;  Cr.  $911.50;  Expense,  $273.27;  Int.  &  Dis.,  Cr.  $3.75;  Notes  Receivable,  $529.72; 
C.  O.  Smith,  Dr.  $65.75;  C.  H.  Hathaway  &  Co.,  Dr.  $79.36;  Notes  Payable,  $342.18;  H.  T.  Clark,  Cr. 
$526.00;  Merchandise  on  hand,  $876.25. 

Problem  50.  J.  H.  Hall  and  C.  H.  Howard  began  business  January  1,  1910.  J.  H.  Hall's  invest- 
ment was  as  follows:  Merchandise,  $3500.00;  Cash,  $2500.00;  Notes  Receivable,  $1500.00,  with  accrued 
interest  for  fifty-four  days  at  6  per  cent.  His  liabilities  were:  Notes  Payable,  $425.00,  with  accrued 
interest  for  thirty-nine  days  at  6  per  cent;  an  account  in  favor  of  W.  D.  Bridges  for  $250.00.  C.  H.  Howard 
invested:  Cash,  $7000.00;  account  against  A.  R.  Dunn  for  $850.00,  which  the  firm  accepts  at  20  per  cent 
discovmt.     Make  the  opening  journal  entries. 


FINDING    ERRORS  215 

FINDING   ERRORS* 

When  the  trial  balance  will  not  balance  the  bookkeeper  should  first  ascertain  the  exact  amount  of 
the  difference  between  the  two  sides.  He  does  this  in  the  hope  that  a  knowledge  of  the  amount  of  the 
discrepancy  may  enable  him  to  find  the  error  without  an  exhaustive  search  for  it.  If  there  is  only  one 
error  it  is  sometimes  possible  to  locate  it  in  this  way: 

(1)  Having  found  the  amount  of  the  error,  examine  your  books  of  original  entry  to  see  whether  you 
can  find  any  item  of  the  same  amount  which  may  have  been  omitted.  (2)  If  this  sheds  no  light,  divide  the 
amount  of  the  discrepancy  by  two  and  again  examine  your  books  of  original  entry  to  see  whether  an  item 
of  this  size  (half  of  the  amount  of  the  discrepancy)  has  been  posted  to  the  wrong  side  of  an  account.  For 
instance,  if  the  amount  $5.00  has  been  posted  to  the  wrong  side  of  the  ledger  the  result  will  be  that  one 
side  of  the  trial  balance  will  be  $10.00  larger  than  the  other  side.  (3)  If  the  error  is  still  undiscovered, 
it  may  be  that  there  has  been  a  transposition  of  figures;  that  is  to  say,  two  figures  have  been  reversed, 
as  when  the  number  18  has  been  written  as  81.  The  amount  of  the  discrepancy  caused  by  such  an  error 
is  always  divisible  by  9.  In  the  foregoing  illustration,  the  difference  between  81  and  18  is  63,  which  is 
divisible  by  9.  (4)  If  the  bookkeeper  writes  an  amount  one  or  two  spaces  to  the  right  or  the  left  of  the 
columns  in  which  he  should  have  written  it  the  amount  of  the  discrepancy  so  caused  is  divisible  by  9. 
For  instance,  if  81^  is  written  as  $81.00  the  difference  is  $80.19,  which  is  divisible  by  9.  This  being  a 
slide  of  two  columns,  it  is  also  divisible  by  99,  the  result  of  such  division  being  81,  the  exact  figures  that 
were  misplaced. 

It  must  be  borne  in  mind  that  none  of  the  plans  suggested  above  will  throw  any  light  whatever  upon 
the  difficulty  if  there  is  more  than  one  mistake,  and  it  is  by  no  means  certain  that  the  discrepancy  will 
be  located  by  any  of  these  plans  even  if  there  is  only  one  mistake.  However,  they  are  worth  trying,  as 
it  only  requires  a  few  minutes  after  the  amount  of  the  discrepancy  is  determined  to  search  for  possible 
errors  of  one  of  the  four  kinds  above  mentioned. 

In  a  great  majority  of  cases,  however,  the  bookkeeper  finds  that  the  mistake  has  to  be  hunted  for. 
A  thorough  exhaustive  search  for  the  mistake  must  be  instituted  and  the  plan  for  conducting  the  search 
should  be  as  follows:  All  of  the  work  must  be  carefully  gone  over  in  an  order  that  just  reverses  the  order 
in  which  it  was  done  in  the  first  place. 

First  Step.  The  last  thing  you  did  was  to  add  the  debit  and  credit  columns  of  the  trial  balance. 
The  first  thing  that  you  will  do  in  hunting  for  the  error  is  to  verify  this  addition  by  adding  it  in  a  direc- 
tion opposite  to  that  in  which  you  added  it  before. 

Second  Step.  Assuming  that  your  addition  of  the  trial  balance  is  correct  and  the  error  is  still  undis- 
covered, the  next  step  is  to  check  the  amounts  shown  in  the  trial  balance  back  to  the  ledger.  You  have 
in  your  ledger  lead  pencil  footings  which  you  transferred  to  the  trial  balance.  Now  from  the  trial  balance 
check  back  to  these  lead  pencil  footings,  placing  check  marks  opposite  the  items  in  the  trial  balance  and 
the  footings  in  the  ledger  as  you  find  they  are  in  agreement.  When  this  has  been  done,  inspect  the  trial 
balance  to  see  that  everything  has  been  checked,  and  inspect  the  ledger  to  see  that  all  footings  are  checked. 

Third  Step.  The  mistake  still  remaining  undiscovered,  it  is  necessary  to  go  back  one  step  further. 
Add  the  debit  and  credit  columns  of  the  ledger,  verifying  the  lead  pencil  footings  therein. 

Fourth  Step.  The  mistake  still  being  undiscovered,  and  having  verified  the  addition  of  all  the  ledger 
colunms,  it  is  necessary  to  check  the  ledger  items  back  to  the  books  of  original  entry.  Trace  back  from 
the  ledger  to  the  book  of  original  entry,  placing  a  check  mark  opposite  the  ledger  item  and  another  check 
mark  opposite  the  original  entry  "hi  each  case  as  you  find  they  are  in  agreement.  This  work  being  com- 
pleted, carefully  inspect  the  ledger  to  see  that  all  items  are  checked,  and  do  the  same  thing  with  the  books 
of  original  entry. 

Fifth  Step.  The  mistake  still  remaining  undiscovered,  it  is  necessary  to  go  back  one  step  further. 
Inspect  all  books  of  original  entry  to  see  that  you  have  equal  debits  and  credits.  This  will  include  the 
verification  of  all  totals  of  special  books. 

You  have  now  gone  over  your  entire  work  in  an  order  reverse  to  that  in  which  you  performed  the 
work  in  the  first  place,  and  if  the  checking  has  been  done  conscientiously  and  thoroughly  the  mistake  has 
been  discovered.  The  process  above  described  consists  of  steps  which  absolutely  cover  the  ground  and 
there  is  no  possibility  that  the  error  will  remain  undiscovered  if  the  work  is  done  carefully  and  thoroughly. 
There  is,  however,  one  possibility  of  undiscovered  error  that  still  remains.  It  may  be  that  the  books  were 
not  in  balance  at  the  time  of  the  last  closing.  In  other  words,  you  did  not  have  a  balance  to  start  with 
•See  also  page  36,  Part  I. 


216  SUPPLEMENTARY    PROBLEMS 

when  you  began  the  bookkeeping  for  the  period  just  closed.  In  order  to  be  sure  that  this  is  not  the  case, 
carefully  verify  the  balance  at  the  beginning  of  the  period.  Some  bookkeepers  do  this  first,  because  it 
is  so  frequently  found  to  be  the  source  of  error.  Needless  to  say,  it  is  necessary  that  all  of  the  previous 
balance  entries  be  checked  as  the  preceding  trial  balance  is  verified. 

REVIEW  QUESTIONS  No.  5 

Review  Questions.  1.  What  is  meant  by  "compromising  with  a  debtor?"  2.  What  is  a  petty 
cash  sale?  3.  Describe  the  petty  cash  sales  account.  3.  What  is  a  draft?  4.  Name  the  parties  to  a 
draft  and  give  definitions.  5.  Describe  the  voucher  system  of  keeping  track  of  invoices  payable.  6. 
What  is  a  statement  of  account?  How  often  are  statements  usually  submitted  to  customers?  7.  What 
are  "articles  of  co-partnership"'  and  what  points  should  such  a  document  cover?  8.  What  is  a  bill  of 
sale?  9.  What  is  a  memorandum  of  credit?  How  is  it  used?  10  What  entries  are  usually  made  by 
the  customer  when  a  memorandum  of  credit  is  issued?  11.  What  is  an  express  money  order?  Describe 
it.  Tell  how  it  is  used.  12.  What  is  a  sight  draft?  A  time  draft?  13  How  is  a  sight  draft  honored? 
A  time  draft?  14.  Give  the  rule  for  journalizing  drafts  Ca)  When  you  are  the  one  who  draws  (b)  When 
you  are  the  one  drawn  upon  (c)  When  the  draft  is  in  your  favor.  15.  What  is  cash  discount?  Dis- 
tinguish between  trade  discount  and  cash  discount.  16.  What  is  discount  for  the  use  of  money?  Why 
should  this  be  classed  with  interest?  17.  What  is  meant  by  "discount  for  the  anticipation  of  bills?" 
With  what  kind  of  discount  is  this  customarily  classed?  Is  this  a  good  classification?  If  not,  why  does 
the  custom  exist?  18.  What  is  meant  by  "discount"  and  "premium"  as  applied  to  exchange?  19, 
Name  four  of  the  most  important  principles  of  double  entry  bookkeeping.  Show  how  each  is  applied. 
Show  how  the  three-column  cash  book  illustrates  all  four  principles. 

Wholesale  Boot  &  Shoe  Business.  1.  Name  the  columns  used  in  the  three-column  cash  book 
in  this  set  and  state  the  purpose  of  each.  2.  How  is  the  three-column  book  posted?  3.  Describe  in 
detail  the  process  of  closing  the  three-column  cash  book  and  posting  the  footings.  4.  Turn  to  the  illus- 
tration of  the  cash  book  on  pages  146-7  and  be  prepared  to  trace  any  item,  on  either  side,  from  the  orig- 
inal entry  through  to  the  ledger,  where  it  must  appear  on  both  debit  and  credit  sides.  5.  What  are  the 
advantages  of  a  three-column  cash  book?  6.  How  may  the  proprietors  of  a  business  conceal  from  the 
bookkeeper  the  amounts  of  their  respective  interests  in  the  business?  7.  Into  what  account  is  the  Freight 
account  closed?  Why?  8.  Into  what  account  is  the  Advertising  account  closed?  Why?  9.  How  are 
Sundry  Debtors*  accounts  handled  in  the  ledger?  10.  How  are  C.  O.  D.  items  handled  in  the  ledger? 
11.  Why  are  bills  sometimes  dated  ahead?  12.  When  a  trial  balance  is  taken  without  closing  the  books, 
what  lead  pencil  footings  must  be  included,  if  a  journal,  sales  book,  and  three-column  cash  book  are  kept? 
13.  Is  one  entitled  to  any  discount  who  makes  a  part  payment  on  a  bill  within  the  discount  period?  14. 
On  Jan.  1  we  sold  Mdse  amounting  to  $250.00;  terms  2/10  n/30.  On  Jan.  3  goods  were  returned  amount- 
ing to  $50.00.  What  amount  of  cash  settled  the  bill  on  Jan.  11?  15.  When  is  the  C.  O.  D.  account 
credited  for  cash  discount?  Why?  16.  What  is  an  exchange  fee?  17.  What  special  book  :s  some- 
times kept  for  goods  returned  by  customers?  How  is  it  bandied?  13.  What  special  book  is  sometimes 
kept  for  goods  returned  to  creditors?  How  is  it  handled?  19.  How  does  the  amount  of  repair  work 
done  on  furniture  or  real  estate  during  a  given  period  affect  the  amount  which  should  be  written  off  of 
the  inventory  for  depreciation?  20.  What  is  insolvency?  Bankruptcy?  Distinguish  between  them. 
21.  What  is  voluntary  bankruptcy?     Involuntary  bankruptcy? 

Wholesale  Dry  Goods  Business.  1.  What  is  the  ptirpose  of  the  purchase  book?  Describe  it, 
2.  What  devices  are  sometimes  used  to  remind  the  bookkeeper  when  to  pay  bills  in  order  to  secure  a 
cash  discount?  3.  How  is  the  purchase  book  posted  from?  4.  What  is  the  proper  order  of  posting 
when  the  journal,  sales  book,  purchase  book,  and  cash  book  are  used?  5.  What  is  a  specific  duty?  6. 
What  is  ad  valorem  duty?  7.  What  is  the  basis  of  English  exchange?  German?  French?  8.  What 
is  the  purpose  of  the  traveling  expense  account?  How  is  it  handled?  9.  How  do  you  ascertain  the 
amount  to  be  credited  to  Cash  Discount  when  paying  a  foreign  invoice? 

The  Mdse  Account  Subdivided.  1.  If  you  were  to  divide  your  Mdse  account  into  three  parts, 
what  would  they  be?  2,  Upon  what  is  the  percentage  of  profit  based?  3.  If  you  kept  separate  accounts 
with  Mdse  Sales,  Mdse  Purchases,  Merchandise,  In-Freight  and  Out-Freight,  how  would  you  close  these 
accounts?  4.  Into  what  account  should  Rebates  By  Us  be  closed?  5.  Into  what  account  should  Rebates 
to  Us  be  closed?  6.  What  are  the  principal  items  that  go  to  make  up  Manufacturing  Cost?  7.  What 
expenses  should  be  deducted  from  sales  instead  of  being  added  to  cost? 


APPENDIX— SINGLE    ENTRY 


PRELIMINARY  CONSIDERATIONS 

You  have  now  mastered  the  elementary  principles  of  double  entry  bookkeeping.  This 
will  make  the  work  of  single  entry  very  easy,  as  there  is  nothing  in  single  entry  that 
you  have  not  already  learned  in  double  entry.  Before  proceeding  with  the  single  entry 
set,  however,  work  the  following  problems: 

Problem  I.  W.  S.  Ashby  keeps  a  double  entry  ledger.  On  June  30,  1910,  he 
attempted  to  take  a  trial  balance  but  found  that  one  page  of  the  ledger,  the  page  on  which 
was  his  own  account  as  proprietor,  had  been  so  defaced  that  the  balance  could  not  be 
read.  Everything  else  was  legible  and  correct.  Make  a  copy  of  the  partial  trial  balance 
shown  below  and  complete  it  by  inserting  W.  S.  Ashby's  balance  and  the  footings: 


W.  S.  Ashby's  Partial,  Trial  Balance,  June  30,  1910 


Cash       

Real  Estate      .    .    . 
Furniture  &  Fixtures 

Mdse      

Expense 

J.  S.  Dickey      .    . 
J.  L.  Harmon       .    . 
Cherry  Bros.     .    .    . 
W.  S.  Ashby     .    .    . 


1526 
5000 
670 
4000 
500 
500 
363 


72 
00 
00 
00 
00 
00 
50 


4250 


1076 


60 


Problem  11.  A.  C.  Minter  keeps  a  single  entry  ledger.  On  July  31,  1910,  he  found  that  the  page 
of  his  ledger  on  which  his  account  as  proprietor  had  been  kept  had  been  destroyed.  Since  a  single  entry 
ledger  contains  no  accounts  except  with  persons,  the  only  information  that  can  be  secured  from  Mr.  Minter's 
ledger  is  that  personal  accounts  receivable  and  payable  stand  as  follows:  C.  V.  Burton,  Dr.,  $49.60;  Cr., 
$10.00.  A.  D.  Taylor,  Dr.,  $175.60;  Cr.,  $62.50.  H.  P  Towers,  Dr.,  $265.00;  Cr.,  $125.50.  Libby  & 
Son,  Dr.,  $100.00;  Cr.,  $243.64,     Manning  &  Martin,  Cr.,  $215.00 

Your  problem  is  to  find  Mr.  Minter's  present  worth,  or  the  net  capital  of  the  business.  If  there  were 
no  other  assets  or  liabilities  besides  the  personal  accounts  in  the  ledger,  the  problem  would  be  simple. 
But  you  know  that  there  are  usually  other  assets,  and  you  expect  to  find  them  in  this  case.  You  there- 
fore question  Mr   Minter  and  he  replies,  as  follows: 

You:  "How  much  cash  have  you  on  hand?"  Mr.  Minter  (indicating  the  cash  drawer):  "About 
$480.00."  Opening  the  cash  drawer,  you  find  in  it  $457.63  in  currency  and  coin,  and  R.  D.  Smith's  check 
for  $25.00  payable  to  Mr.  Minter.  In  taking  out  the  cash  to  count  it,  you  come  across  a  note  signed  by 
T.  J.  Green  in  Mr.  Minter's  favor  for  $500.00,  and  a  list  of  goods  on  hand  totaling  $5647.20.  You:  "  I  find 
here  a  note  for  $500.00  signed  by  T.  J.  Green.  Do  you  hold  any  other  notes?"  Mr.  Minter:  "No;  but 
I  owe  $1000.00  to  the  First  National  Bank  on  a  note.  There  are  no  other  notes  either  receivable  or  pay- 
able." You:  "Do  you  owe  any  interest  on  the  note  in  favor  of  the  bank  or  is  any  interest  due  you  on 
Mr.  Green's  note?"  Mr.  Minter:  "Some  interest  has  accrued  on  each  note  but  the  two  interest  items 
exactly  cancel  each  other."  You:  "Is  this  list  of  merchandise  on  hand  correct?"  Mr.  Minter:  "Yes, 
it  was  taken  yesterday."  You:  "Is  there  any  other  property  belonging  to  the  business?"  Mr.  Minter: 
"The  store  fixtures  are  mine,  and  I  value  them  at  $500.00.  There  is  no  other  property  belonging  to  the 
business,  and  I  do  not  owe  a  cent  except  for  the  accounts  shown  in  the  ledger  and  the  note  for  $1000.00." 

Prepare  a  financial  account,  as  you  always  have  in  previous  sets.  The  only  difference  is  that  in  this 
case  less  information  can  be  secured  from  the  ledger  than  from  a  double  entry  ledger.  The  net  capital 
shown  by  the  statement  shovild  appear  in  the  ledger  as  the  credit  balance  of  the  proprietor's  account. 

i 


U  SINGLE    ENTRY 

INTRODUCTION    TO    SINGLE    ENTRY 

Progressive  business  men  prefer  double  entry  because  they  find  it  desirable  to  know 
certain  facts  about  their  business  affairs  which  a  single  entry  system  will  not  reveal.  This 
is  especially  true  when  their  business  interests  are  large  or  extensive,  in  which  case  a 
double  entry  set  of  books  is  almost  imperative. 

While  pure  single  entry  is  little  used  among  the  best  houses,  many  retail  concerns 
employ  a  combination  of  single  and  double  entry,  and  for  this  reason,  if  for  no  other, 
it  is  well  for  the  student  to  understand  what  the  single  entry  method  is.  The  work  of 
this  chapter  will  be  of  value  to  the  student  in  teaching  him  the  principles  of  single  entry, 
not  so  much  because  he-  may  be  called  upon  to  keep  a  set  of  single  entry  books,  but  because 
he  is  likely  to  come  in  contact  with  accounting  in  which  some  single  entry  features  are 
incorporated  in  a  double  entry  system,  subordinate  to  the  general  double  entry  scheme. 

Single  entry  bookkeeping  is  a  method  of  keeping  unrelated  memorandums  and  records 
of  business  transactions  such  as  the  proprietor  of  a  business  may  deem  necessary  for  his 
protection  and  information. 

The  facts  of  which  memorandums  are  usually  kept  in  single  entry  are:  (1)  The  receipts 
and  payments  of  cash,  (2)  The  charges  against  and  credits  to  persons,  on  account.  Some- 
times the  inventories  of  property  owned  are  kept  as  a  matter  of  record. 

Single  entry  derives  its  name  from  the  circumstance  that  each  entry  is  a  record  of 
a  single  fact,  either  a  debit  or  a  credit,  rather  than  a  record  of  two  or  more  facts  affecting 
both  sides  of  the  ledger  equally,  as  in  double  entry. 


Comparison  Between  Single  and  Double  Entry. 

In  Single  Entry,  accounts  are  kept  only  with  persons,  cash  and  sometimes  property 
inventories,  and  since  accounts  with  persons  and  cash,  and  inventories,  must  exhibit 
either  assets  or  liabilities,  and  not  losses  or  gains,  it  is  apparent  that  separate  losses  and 
gains  cannot  be  shown  by  the  single  entry  method.  This  failure  to  show  the  separate 
losses  and  gains  constitutes  the  chief  disadvantage  of  single  entry  as  a  system,  and  is  the 
principal  reason  for  its  inferiority  to  double  entry. 

In  double  entry,  equal  debits  and  credits  are  recorded  for  every  transaction.  These 
are  posted  to  the  ledger.  As  the  debits  posted  are  exactly  equal  to  the  credits  posted, 
the  equality  of  the  two  sides  of  the  ledger  is  constantly  preserved.  If  the  trial  balance 
fails  to  exhibit  this  equality,  the  bookkeeper  at  once  knows  (provided  no  original  entry 
is  out  of  balance)  that  there  has  been  an  error  or  omission  in  posting.  When  the  single 
entry  method  is  used,  the  bookkeeper  has  no  such  systematic,  almost  automatic,  device 
for  the  detection  of  errors  of  this  kind  (errors  in  posting),  which  occur  more  frequently, 
probably,  than  all  others  combined. 

Double  entry  is  a  scientific  system  of  bookkeeping  by  which  the  chances  of  error  are 
reduced  to  the  mininum  and  under  which  it  is  possible  to  so  classify  and  analyze  the  busi- 
ness transactions  that  almost  any  desired  facts  in  regard  to  the  progress  or  condition 
of  the  business  can  be  ascertained.  Single  entry  is  an  unscientific  bookkeeping  expedient 
by  which  only  the  barest  facts  as  to  the  current  assets  and  liabilities  of  the  business  are 
set  forth  with  no  further  guarantee  of  their  accuracy  than  the  carefulness  of  the  book- 
keeper who  made  and  posted  the  entries. 


SINGLE    ENTRY 


Ul 


A    SINGLE    ENTRT    SET 

Since  the  facts  which  are  to  be  recorded  in  single  entry  have  to  do  with  persons  and 
.cash  only,  as  has  been  stated,  it  is  only  necessary  that  three  books  be  kept,  as  follows: 

(a)  The  Cash  Book,  in  which  are  kept  the  receipts  and  disbursements  of  cash. 

(b)  The  Day  Book,  in  which  debits  and  credits  to  personal  accounts  are  recorded 
as  they  occur. 

(c)  The  Ledger,  to  which  the  items  in  the  day  book  are  posted. 

Auxiliary  books  or  books  of  memorandum  of  almost  any  kind  can  be  kept  if  desired; 
as,  the  bill  book,  invoices  payable  register,  etc. 

THE    CASH  BOOK 

The  single  entry  cash  book  usually  differs  in  form  from  the  double  entry  cash  book, 
though  not  necessarily  so.  The  accompanying  illustration  shows  the  first  few  cash  book 
entries  and  also  shows  the  method  of  ruling  for  balancing  the  book.  Note  that  the  Debit 
and  Credit  columns  are  side  by  side  on  the  same  page.  This  arrangement  affords  a  wide 
column  for  the  explanatory  matter  and  presents  the  debits  and  credits  in  the  order  in 
which  they  occurred.     Note  the  placing  of  the  dates,  and  do  not  forget  the  year  dates.* 


19- 

CASH  BOOK 

Dr. 

Cb. 

Oct. 

1 
1 

Cash  invested  as  per  Day  Book  entry      

Paid  rent  for  October,  1910,  by  check      

*** 

** 

*** 

6 

Paid  The  American  Cereal  Co.  in  full  of  account    .    . 

* 

** 

6 

Paid  Students'  salary  for  week  ending  Oct.  6     .    .    . 

** 

** 

6 

Received  from  cash  sales  as  per  Cash  Reg 

** 

** 

6 

Balance          

** 
** 

*** 

** 

Balance       

*** 

*** 

** 

Oct. 

8 

*** 

THE  DAY  BOOK 

This  book  corresponds  to  the  double  entry  journal  in  that  it  is  the  book  in  which  the 
original  entries  of  debits  and  credits  are  made  which  are  later  posted  to  the  ledger,  and 
in  the  fact  that  the  entries  are  made  as  the  transactions  occur  and  in  the  order  of  their 
occurrence.  It  is  also  somewhat  similar  in  form  and  ruling  to  the  double  entry  journal. 
But  here  the  resemblance  ends.  The  single  entry  day  book  does  not  record  equal  debits 
and  credits  as  does  the  double  entry  journal,  but  each  entry  records  a  single  debit  or  a 
single  credit,  as  the  case  may  be.  The  separate  items,  if  any,  are  written  in  the  left- 
hand  column  and  the  total  in  the  right-hand  column.  In  this  set  the  total  only  is  posted, 
but  the  separate  items  could  be  posted  instead,  if  preferred.  The  following  form  shows 
a  few  t}'pical  day  book  entries  for  the  single  entry  set. 

Note  that  opposite  the  name  of  each  account  debited  or  credited  in  the  day  book  is 
placed  the  abbreviation  Dr.  or  Cr.  This  is  the  means  of  indicating  which  side  of  the 
ledger  the  transaction  is  to  be  posted  to,  and  you  must  not  forget  to  write  it  as  you  make 
each  entry. 

*These  and  other  forms  shown  in  this  chapter  are  intended  as  illustrations  merely,  and  are  not  to 
be  relied  upon  by  the  student  in  writing  entries  in  his  books. 


IV 


SINGLE    ENTRY 


Note  that  the  transaction  on  Oct.  6  appears  in  both  the  cash  book  and  the  day  book. 
Whenever  any  money  is  paid  out,  an  entry  is  made  in  the  cash  book  to  show  the 
payment  of  cash;  if  the  payment  is  on  account,  another  entry  is  made  in  the  day  book, 
to  show  the  debit  of  the  personal  account.  When  money  is  received  on  account,  an 
entry  crediting  the  person  is  made  in  the  day  book,  and  the  cash  received  is  recorded 
in  the  cash  register,  the  total  being  periodically  entered  in  the  cash  book  as  a  receipt, 
as  will  be  shown  later. 

DAY  BOOK 
•  October  1,  19— 


F.  P.  Nissen,  Proprietor  Cr. 

F.  P.  Nissen  is  engaged  in  the  retail  grocery  busi- 
ness at  105  Oak  Park  Ave.,  Oak  Park,  111.  His  assets 
at  this  time  are  as  follows: 

Cash  in  bank 

Cash  in  cash  register 

Stock  of  groceries  on  hand  valued  at 

Horse  and  wagon  valued  at 

Furniture  and  fixtures  valued  at 

Accounts  receivable  as  follows. 

Mrs.  Wm.  Conant,  110  S.  East  Ave. 
Mrs.  Chas.  P.  French,  157  S.  East  Ave. 


Mrs.  Wm.  Conant,  110  S.  East  Ave. 
To  groceries  as  per  order  slip  No. 

2 


Dr. 


Mrs.  Chas,  P.  French,  157  S.  East  Ave., 
By  cash  on  account 

4 


Cr. 


H.  J.  Heinz  Co.,  1814  S.  Clark  St.,  Chicago  Cr 

3  doz.  Med.  Baked  Beans  and  Sauce  1 .40 

1  doz.  10-oz.  Royal  Select  Queen  olives 

2  doz,  8-oz.  Octagon  Ketchup  1 .  35 


The  American  Cereal  Co.,  9  Jackson  Boul.,  Chicago  Dr. 
To  cash  in  full  of  account 


*** 

** 
** 


THE  LEDGER 

The  single  entry  ledger  differs  from  the  double  entry  ledger  in  form  only,  though. it 
does  not  necessarily  differ  even  in  that  respect,  because  a  center-ruled  ledger  could  be 
used  as  well  for  single  entry  as  for  double  entry.  Following  is  an  illustration  of  the  form 
used  in  this  set. 

MRS.  WM.  CONANT 
19—  110  S.  East  Ave.  Dr.  Cr. 


Oct. 


8 
12 


Balance  due 

To  groceries  as  per  order  slip  No.  1 
To  groceries  as  per  order  slip  No,  7 
By  cash  as  per  Day  Book 

To  groceries  as  per  order  slip  No.  15 
To  groceries  as  per  order  slip  No.  22 


** 

** 

* 

** 

* 

** 

** 

** 

** 

** 

** 

** 

* 

** 

* 

** 

SINGLE    ENTRY 


Order  Slips 

Your  outfit  contains  a  pad  of  blank  order  slips.  These  ordinarily  come  in  dupli- 
cate and  are  filled  out  by  the  salesman,  who  sends  one  copy  with  the  goods  and 
one  copy  to  the  cashier's  desk.  Sometimes  order  slips  come  in  triplicate,  the  third 
copy  being  put  to  some  special  use  in  connection  with  either  the  accounting  of  delivery 
system. 

In  order  that  you  may  get  a  comprehensive  idea  of  the  procedure  in  the  retail  grocery  business,  you 
are  to  perform  a  part  of  the  duties  of  the  salesman  in  addition  to  your  work  as  bookkeeper  and  cashier. 
As  salesman  you  are  to  fill  out  the  order  slips.  As  cashier,  you  have  charge  of  the  cash  register.  As  book- 
keeper you  make  the  proper  entries  in  the  books  for  all  transactions. 

The  duties  of  cashier  and  bookkeeper  are  so  intimately  connected  that  they  are  usually  performed 
by  the  same  person;  and  it  is  not  unusual,  especially  in  the  smaller  stores,  for  the  bookkeeper  and  cashier 
to  act  as  salesman  as  well,  especially  at  times  when  there  is  no  other  salesman  in  the  store,  or  when  an 
order  comes  by  telephone. 

The  pad  of  order  slips  which  accompanies  your  outfit  consists  of  single  slips.  It  will 
be  assumed  that,  as  salesman,  you  have  filled  them  out  in  duplicate  and  send  both  copies 

to  the  cashier,  who  after  stamping  on  the 
duplicate  the  date  and  number  of  the  sale, 
the  amount  and  kind  of  the  sale,  and  the 
initial  of  the  salesman  (all  done  automatic- 
ally by  the  cash  register  in  one  operation), 
has  sent  it  with  the  goods.  The  original, 
which  is  the  slip  you  fill  out,  is  filed.  When 
you  fill  out  an  order,  write  at  the  bottom 
the  expression  "Charged,"  "Paid,"  or 
"CO.  D.,"  as  the  case  may  be. 

Filled  orders  are  either  taken  away  by  the  cus- 
tomer or  sent  to  the  delivery  clerk  to  be  delivered, 
but  you  will  have  nothing  to  do  with  this  part  of 
the  work.  The  duplicate  order  slip  accompanies  the 
goods  whether  the  goods  are  taken  by  the  customer 
or  sent  to  the  delivery  clerk. 

The  order  slip  must  always  contain  thft 
name  and  address  of  the  customer,  if  it  is  a 
charge  slip,  whether  the  goods  are  taken  by 
the  customer  or  delivered.  C.  0.  D.  goods 
are  always  delivered;  therefore  the  name  and 
address  must  always  be  written  on  a  C.  0.  D. 
slip.  In  the  case  of  paid  orders,  the  name 
and  address  of  the  customer  must  always 
ORDER  SLIP  ^^  shown  if  the  goods  are  to  be  delivered. 


F.  P.  IVISSEN 

105  OAK   PARK  AV-ENUE 

Groceries  AND  >1eats 

Oak  Park,  HI., i^/1 19.rrr 

o  .J  .       Mrs.  William  Conant 

Sold  to 

A              AAA.^.    no  S.  East  Ave. 
Salesman Address 

Quan. 

ARTICLES 

Price! 

Amount 

1 

Leg  Spring  Lamb  5  lb. 

20 

/ 

00 

2 

cans  French  Pea^ 

15 

SO 

2 

heads  Lettuce 

12 

24 

1 

bat.  Olive  Oil 

SO 

1 

Vb.  BuUer 

2 

38 

22 

Charge 

i 

Cash  Slips 

If  the  customer  pays  for  the  goods  and  takes  them  with  him,  an  order  slip  is  not  made 
out.  A  cash  slip  is  filled  out.  This  does  not  contain  the  name  and  address  of  the  cus- 
tomer, but  is  a  mere  list  of  the  items  sold,  with  the  total,  if  more  than  one  item  is  sold. 


VI 


SINGLE    ENTRY 


At  the  top  of  the  slip  ace  printed  the  words  "Pay  the  Cashier"— a  direction  to  the  cus- 
tomer.    The  cash  shps  are  numbered  consecutively    and   each   is  attached  to   a    stub 

which  bears  the  same  number,  on  which  the 
amount  of  the  sale  must  be  noted  at  the 
time  the  slip  itself  is  made  out. 


No.  1                              $    -^^ 

Perforated  line 

F.P.  NISSEN,  Groceries  and  Meats 

Pay  the  Cashier 

Salesman  .4 OAK  PARK,  \LL.,1^./ L  19.— 

Quan. 

ARTICLE 

Price 

Amount 

2 

Bread 

05 

10 

1 

lb.  Bacon 

28 

1 

doz.  Eggs 

26 

H 

1 

CASH   SLIP 


Customers'  Receipts 

When  a  customer  makes  a  payment  on 
account,  a  customers'  receipt  is  issued  for  the 
amount  recorded  in  the  cash  register  as  re- 
ceived. These  are  ordinarily  issued  in  dupli- 
cate; one  copy  is  given  to  the  customer  after 
being  placed  in  the  machine  and  stampedj 
the  other  copy  is  retained  and  filed. 

The  pad  of  customers'  receipts  which 
accompanies  your  outflt  consists  of  single 
slips.  These  are  to  be  filed  by  the  cashier, 
it  being  assumed  in  each  case  that  a  dupli- 
cate has  been  made,  stamped,  and  given  to 
the  customer. 

The  Cash  Register 

In  connection  with  the  retail  grocery 
business  which  is  illustrated  in  the  following 
single  entry  set,  it  is  assumed  that  the  student  as  cashier  uses  a  cash  register,  now  con- 
sidered to  be  an  almost  indispensable  adjunct  of  an  extensive  retail  business.  The  cash 
register  is  an  automatically-locking  device  for  holding  money,  which  can  be  unlocked 
and  opened  only  by  pressing  buttons  or  keys  in  front.  There  are  five  rows  of  these  buttons 
consisting  of  nine  buttons  each  When  the  cashier  presses  the  proper  buttons,  the  money- 
drawer  opens  and  at  the  same  time  the  interior  mechanism  of  the  cash  register  automat- 
ically records  upon  a  narrow  roll  of  paper, 
called  the  "detail  strip,"  the  amount  of 
the  sale  or  payment  together  with  the 
initial  of  the  salesman  and  the  kind  of 
sale  or  payment.  Cash  Sales,  Cash  Re- 
ceived on  Account,  C.  0.  D.  Sales,  C.  0.  D. 
Cash  Returns,  C.  0.  D.  Goods  Returned, 
Goods  Returned  on  Account,  Charge  Sales 
and  Cash  Sales,  are  all  recorded  on  the 
detail  strip  in  the  ordei  of  their  occurrence, 
and  each  kind  indicated  by  a  special 
abbreviation  or  sign.  The  machine  con- 
stantly shows  the  number  and  the  totals 
of  each  of  the  different  kinds  of  transac- 
tions recorded.  The  cash  register  has  one 
button  marked   "No   sale"    which  can   be  cash  register 


SINGLE    ENTRY 


VI 1 


pressed  when  the   cashier  wishes  to   open  the  register  without  recording  a  receipt  or 
sale,  as  when  it  might  be  desired  to  accommodate  some  one  by  changing  a  bill. 

Whenever  any  sale  or  payment  is  recorded,  the  cashier  inserts  in  the  machine  the 
duplicate  of  the  order  slip  or  other  voucher  used,  and  the  machine  automatically  stamps 
upon  it  the  record  of  the  transaction.  Some  machines  issue  little  cardboard  tickets  prop- 
erly stamped,  instead  of  printing  the  record  directly  upon  the  voucher.  These  stamped 
records,  whether  they  be  printed  upon  the  vouchers  or  upon  separate  tickets,  constitute 
a  check  upon  the  accuracy  and  honesty  of  the  cashier  and  show  the  customer  that  the 
proper  records  of  transactions  are  being  made. 

Cash  Register  Sheets 

As  it  is  not  practicable  for  each  student  to  have  a  cash  register,  there  are  provided 
for  each  outfit  several  sheets  of  paper  (Cash  Register  Sheets)  ruled  with  columns  to  repre- 
sent the  different  kinds  of  transactions  for  which  the  cash  register  shows  separate  totals. 
Instead  of  actually  pushing  the  buttons  of  a  cash  register  and  thus  making  the  records 
on  the  detail  strip,  you  will  make  pen  and  ink  records  in  the  columns  of  the  specially  ruled 
sheets  provided. 


Cash  Register  Sheet 


Cash  Sales 

Cash 

Rec'd  on 

Acct. 

C.  O.  D. 

Sales 

C.  0.  D. 

Cash 
Returns 

C.  O.  D. 

Goods 

Return'd 

Goods 
Return'd 
on  Acct. 

Charge 
Sales 

Cash  Paid 
Out 

Change 

in  register  Oct.  1,  19 — 

* 

* 

* 

* 
* 
* 

** 
** 
** 
** 
** 
** 
** 
** 
** 
** 
** 
** 

**   ** 

*   ** 

**   ** 

*  ** 

*  ** 

*  ** 

*  ** 

*  ** 

*  ** 

*  ** 

*  ** 

*  ** 

** 

** 

**  ** 

*  ** 

*  ** 

0.00 

0.00 

**   ** 

**  ** 

File 

Accompanying  your  outfit  you  will  find  a  file  containing  three  sections.  This  file  is 
for  your  convenience  in  disposing  of  papers  that  you  make  out.  In  the  first  section 
C.  O.  D.  sales  slips  are  placed  temporarily  while  the  orders  are  being  delivered.  In  the 
second  section  are  placed  the  cash  slips,  the  paid  order  slips  (which  are  in  effect  the  same 
a?  cash  slips),  the  C.  0.  D.  paid  slips,  and  the  customers'  receipts.  In  the  third  section 
are  placed  the  charge  sale  slips  and  also  the  goods  returned  slips.  It  is  assumed  that 
whenever  any  slip  of  any  kind  is  issued  one  copy  goes  in  our  files  and  one  copy  goes  to 
the  customer.  Note  that  the  papers  in  the  Cash  Sales  and  Cash  Receipts  section  of 
the  file  will  exactly  check  with  the  total  cash  receipts  as  shown  by  the  Cash  Register 
Sheev. 


Viii  SINGLE    ENTRY 

YOUB,  DUTIES  STJMMAKIZED 

(1)  Fill  out  the  order  slips,  cash  slips,  and  customer's  receipts  as  these  are  required. 

(2)  Make  pen  and  ink  records  on  the  Cash  Register  Sheets  of  amounts  which  would 
ordinarily  be  recorded  in  the  cash  register. 

(3)  Make  the  bookkeeping  entries. 

Following  is  a  list  of  the  different  kinds  of  transactions  and  the  procedure  in  each 
case,  except  as  to  the  filing,  directions  for  which  will  be  given  in  connection  with  specific 
transactions. 

(a)  Cash  sale,  taken.  Fill  out  a  cash  slip  and  record  the  amount  received  on  the 
Cash  Register  Sheet. 

(b)  Cash  Sale,  delivered.  Fill  out  an  order  slip  and  record  the  amount  received 
on  the  Cash  Register  Sheet. 

(c)  Cash  received  on  account.  Fill  out  a  customers'  receipt,  make  a  record  on  the 
Cash  Register  Sheet,  and  make  an  entry  in  the  day  book. 

(d)  C.  O.  D.  Sale.     Fill  out  an  order  slip  and  make  a  record  on  the  Cash  Register  Sheet. 

(e)  C.  O.  D.  Cash  Returns.     Make  a  record  on  the  Cash  Register  Sheet. 

(f)  C.  0.  D.  Goods  Returned.     Make  a  record  on  the  Cash  Register  Sheet. 

(g)  Charge  Sale.  Fill  out  an  order  slip,  make  a  record  of  the  transaction  on  the 
Cash  Register  Sheet,,  and  make  an  entry  in  the  day  book, 

(h)  Goods  Returned  on  Account.  Make  an  entry  on  the  Cash  Register  Sheet,  and 
give  the  customer  credit  in  the  day  book. 

(i)  Cash  Paid  Out.  Make  a  record  on  the  Cash  Register  Sheet  and  an  entry  in  the 
cash  book.     If  the  payment  be  on  account,  an  entry  in  the  day  book  is  also  necessary. 

(j)     Purchases  on  account  are  entered  in  the  day  book  as  they  occur. 

At  the  end  of  the  day,  or  whenever  it  seems  desirable,  the  Cash  Sales  column,  the  Cash 
Received  on  Account  column,  and  the  C.  0.  D.  Cash  Returns  column  of  the  Cash  Register 
Sheet  are  footed  and  added  together  and  the  grand  total  is  entered  in  the  cash  book  as 
a  receipt,  as  shall  be  explained  in  greater  detail  hereafter. 

In  entering  sales  on  account  in  the  day  book  it  is  not  necessary  to  itemize  them,  as 
we  have  itemized  records  on  the  order  slips  which  are  filed;  nor  is  it  necessary  to  itemize 
goods  purchased,  as  these  items  would  show  on  the  invoices  which  would  also  be  filed. 
Entries  of  purchases  should  show  the  date,  the  name  and  address  of  the  person  bought 
from,  the  terms  of  purchase  and  the  amount. 

In  working  the  following  transactions,  remember  that  there  are  only  two  things  we 
must  keep  account  of  in  Single  Entry:  (1)  Receipts  and  disbursements  of  cash,  (2)  Debits 
and  credits  affecting  personal  accounts.  Also  remember  that  no  entry  records  anything 
but  a  single  debit  or  a  single  credit. 

Before  beginning  the  work  of  the  set,  see  to  it  that  the  charge  slips  are  numbered  consecutively  from 
1  to  30,  that  the  cash  slips  and  their  corresponding  stubs  are  numbered  from  1  to  20,  and  that  the  custom- 
ers' receipts  are  numbered  from  1  to  10. 


SINGLE    ENTRY  ix 

TRANSACTIONS 

October  1,  19 — .     F.  P.  Nissen  is  engaged  in  the  retail  grocery  business  at  105  Oak 
Park  Ave.,  Oak  Park,  111.     His  assets  at  this  time  are  as  follows: 

Cash  in  bank*  $500 .  00 

Cash  in  cash  register  67.60 

Stock  of  groceries  on  hand  valued  at  5432 .  69 

Horse  and  wagon  valued  at  275.00 

Furniture  and  fixtures  valued  at  450.00 
Customers  owe  him  as  follows: 

Mrs.  Wm.  Conant,  110  S.  East  Ave.  $13.56 

Mrs.  Chas.  P.  French,  157  S.  East  Ave.  23.47 

Mrs.  Edwin  C.  Hedrick,  Jr.,  124  N.  Kenilworth  Ave.  5.89 

Mrs.  Louis  N.  Mellick,  364  S.  Euclid  Ave.  27 .  56 

Mrs.  Ward.  N.  Seabury,  175  Forest  Ave.  16-37 

Mrs.  N.  N.  Richards,  154  Circle  Ave.,  Forest  Park  4.23 

Mrs.  Wm.  Beye,  264  Wisconsin  Ave.  12 .  50 

Mrs.  Phillip  Furbeck,  1110  South  Boulevard                   '  6.78 
His  liabilities  are  as  follows: 

National  Biscuit  Co.,  110  N.  Morgan  St.,  Chicago  |27.60 

The  American  Cereal  Co.,  9  Jackson  Boul.,  Chicago  8.Q^ 

H.  J.  Heinz  Company,  1814  S.  Clark  St.,  Chicago  23.42 

Armour  &  Co.,  239  S.  Water  St.,  Chicago  17.75 

Washburn-Crosby  Co.,  145  Van  Buren  St.,  Chicago  124.68 

Steps  necessary  to  open  the  single  entry  books 

1.  Enter  in  the  cash  book  the  amount  of  cash  on  hand. 

2.  Open  accounts  in  the  ledger  with  the  proprietor,  all  customers,  and  all  creditors, 
in  the  order  named,  allowing  one-third  of  a  page  for  each  account.  Enter  in  the  cus- 
tomers' and  creditors'  accounts  the  balances  shown  by  the  opening  statement. 

3.  Make  a  day  book  entry  crediting  the  proprietor  with  the  total  of  the  assets  of  the 
business,  listing  the  items  at  the  bottom  of  the  entry.  Make  another  entry  debiting  the 
proprietor  with  the  total  of  the  liabilities  of  the  business,  listing  the  items  below.  Post 
both  of  these  entries  to  the  proprietor's  account  on  page  1  of  the  ledger. 

After  opening  the  books  as  above,  enter  the  amount  of  change  on  hand  ($67.60)  on 
one  of  the  Cash  Register  Sheets,  at  the  top  of  the  left-hand  column,  with  the  explanation 
"Change  on  hand  Oct.  1,  19—."  Give  the  sheet  the  number  1.  You  are  now  ready 
for  business. 

OOTOBEB  1.  19— 

Transaction  No.  1.     Paid  rent  for  October  by  check,  $100.00. 

Enter  this  in  the  cash  book  only.  As  the  payment  was  by  check,  the  transaction  is  not  recorded  on 
the  Cash  Register  Sheet. 

Transaction  No.  2.  Sold  for  cash  2  loaves  bread,  at  5^;  1  lb.  bacon,  28^;  1  doz. 
eggs,  260. 

Make  out  a  cash  slip.  Record  the  amount  received  on  the  Cash  Register  Sheet,  in  the  left-hand  column. 
File  the  cash  slip  in  the  section  of  the  file  marked  Cash  Sales  and  Cash  Receipts. 


*  The  student  is  not  required  to  keep  a  bank  pass  book,  but  whenever  necessary  he  will  be  told  what 
the  bank  balance  is. 


X  SINGLE    ENTRY 

Transaction  No.  3.  Sold  to  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  on  account,  1  leg 
of  spring  lamb,  5  lbs.  at  20^;  2  cans  French  peas,  at  15^;  2  heads  lettuce,  at  120;  1  bottle 
olive  oil,  300;  1  lb   butter,  380. 

Make  out  an  order  slip,  writing  the  word  Charge  or  the  abbreviation  Chg.  at  the  bottom  of  the  shp 
Then  record  the  amount  of  the  sale  in  the  Charge  Sales  column  of  the  Cash  Register  Sheet,  and  make  the 
day  book  entry  charging  Mrs.  Wm.  Conant.  When  this  has  been  done  file  the  order  slip  in  the  section 
of  the  file  marked  Charge  Sales. 

Transaction  No.  4.     Sold  for  cash  1  can  lobster,  250. 

Proceed  exactly  as  described  in  the  note  of  explanation  under  Transaction  No.  2. 

Transaction  No.  5.  Sold  to  Mrs.  Chas.  P.  French,  157  S  East  Ave-,  on  account, 
2  boxes  soda  crackers,  at  100;  1  can  French  peas,  150;  1  box  Coleman's  mustard,  150; 
2  heads  cabbage,  at  100;  1  sack  salt,  100;  1  can  salmon,  150;  3  loaves  bread,  at  50,  1  lb. 
imported  Swiss  cheese,  400. 

Proceed  exactly  as  described  in  the  note  of  explanation  under  Transaction  No   3 

OCTOBER  2 

Transaction  No.  6.  Sold  to  Jas  H.  Greenman,  231  Woodward  Terrace,  for  cash, 
to  be  delivered,  2^  lbs.  hahbut  steak,  at  180;  ^  do?.  Florida  oranges,  at  500;  2  cans  Tele- 
phone peas,  at  12^0;  2  cans  Cupid  fancy  tomatoes,  at  12^0;  1  8-lb.  box  prunes,  850. 

Make  out  an  order  slip,  writing  the  word  Paid  at  the  bottom.  Record  the  amount  of  the  sale  in  the 
left-hand  column  of  the  Cash  Register  Sheet.  Place  the  order  slip  in  the  section  of  the  file  marked  Cash 
Sales  and  Cash  Receipts. 

Transaction  No.  7.  Sold  for  cash  1  jar  Southwell's  imported  marmalade,  230;  1  lb. 
creamery  butter,  360;  2  boxes  soda  crackers,  at  100. 

Follow  the  instructions  given  in  the  note  under  Transaction  No.  2,  and  in  future  always  follow  this 
procedure  when  a  sale  for  cash  is  made  which  is  not  to  be  delivered. 

Transaction  No.  8.  Sold  on  account  to  Mrs.  Edwin  C.  Hedrick,  Jr.,  124  N.  Kenil- 
worth  Ave.,  3  lbs.  Star  ham,  sliced,  at  280;  1  box  Coleman's  mustard,  150;  3  loaves  bread, 
at  50;  1  lb.  creamery  butter,  360;  ^  lb.  imported  Swiss  cheese,  at  400;  2  pkgs.  Uneeda 
biscuit,  at  50;  2  cans  Heinz  baked  beans  and  tomato  sauce,  at  150. 

Follow  the  instructions  given  under  Transaction  No.  3,  and  in  future  always  follow  this  procedure 
when  a  sale  on  account  is  made. 

Transaction  No.  9.  Sold  to  Mrs.  Paul  Peters,  740  Chicago  Ave.,  for  cash,  to  be 
delivered,  2  pkgs.  Saratoga  flakes,  at  150;  2  pkgs.  Quaker  oats,  at  100;  3  cans  Monarch 
canned  corn,  at  150;  3  cans  Monarch  canned  peas,  at  150;  1  broom,  400;  1  bottle  bluing, 
100;  3  bars  Naphtha  soap,  at  50. 

Follow  the  instructions  given  in  the  note  under  Transaction  No.  6,  and  in  future  always  follow  this 
procedure  when  a  sale  is  made  for  cash  to  be  delivered. 

Transaction  No.  10.     Received  of  Mrs.  Chas.  P.  French  $10.00  on  account. 

Fill  out  a  customer's  receipt.  Enter  the  amount  received  on  the  Cash  Register  Sheet,  in  the  column 
headed  Cash  Received  on  Account.  Make  a  day  book  entry  crediting  the  customer.  Place  the  customer's 
receipt  in  the  section  of  the  file  marked  Cash  Sales  and  Cash  Receipts. 

These  slips  are  usually  kept  on  a  spindle  until  the  cashier  can  find  time  to  enter  them,  and  the  same 
thing  is  done  with  charge  orders,  receipts  for  or  memorandums  of  cash  paid  out,  etc.,  but  the  student 
will  make  all  day  book  entries  and  cash  credit  entries  as  the  transactions  occur. 


SINGLE    ENTRY  XI 

OCTOBEB  3 

Transaction  No.  11.  Sold  to  Mrs.  C.  V.  Clark,  789  Lake  St.,  C.  O.  D.,  the  follow- 
ing groceries:  25  lbs.  W.  C.  Superlative  flour,  at  50;  2  pecks  apples,  at  600;  3  lbs.  Star 
bacon,  sliced,  at  280. 

Fill  out  an  order  slip,  writing  C.  O.  D.  at  the  bottom  of  it.  Enter  the  amount  of  the  sale  on  the  Cash 
Register  Sheet,  in  the  column  headed  C.  O.  D.  Sales,  and  place  the  order  slip  temporarily  in  the  section 
of  the  file  marked  C.  O.  D.  Sales. 

Transaction  No.  12.  Sold  for  cash  2  pecks  Irish  potatoes,  at  200;  two  cans  Monarch 
canned  corn,  at  150;  two  cans  Monarch  canned  peas,  at  150. 

Transaction  No.  13.  The  delivery  boy  returns  with  $3.29,  as  returns  on  the  C.  O.  D. 
sale  to  Mrs.  C.  V.  Clark. 

If  this  is  the  correct  amount,  enter  it  on  the  Cash  Register  Sheet  in  the  column  headed  C.  O.  D.  Cash 
Returns.  Take  the  C.  O.  D.  slip  from  the  section  of  the  file  marked  C.  O.  D.  Sales,  write  on  it  the  word 
Paid,  and  place  it  in  the  section  marked  Cash  Sales  and  Cash  Receipts. 

OCTOBER  4 

Transaction  No.  14.  Bought  of  H.  J.  Heinz  Company,  1814  S.  Clark  St.,  Chicago, 
111.,  on  30  days'  time,  the  following  bill  of  groceries: 

3  doz.  Med.  Baked  Beans  and  Sauce,  at  $1.40         $4.20 

1  doz.  10-oz.  Royal  Select  Queen  Olives,  for  2.75 

2  doz.  8-oz.  Octagon  Ketchup,  at  1 .  35  2 .  70         $9 .  65 

Make  an  entry  in  the  day  book,  crediting  H.  J.  Heinz  Company.  This  entry  should  contain  the 
explanation  "Terms,  30  days."  No  further  instruction  will  be  given  as  to  the  procedure  in  handling 
an  entry  of  this  kind. 

Transaction  No.  15.  Sold  for  cash  2  cans  Heinz  medium  baked  beans  and  tomato 
sauce,  at  150;  1  bottle  Royal  select  queen  olives,  250;  2  cans  Monarch  canned  corn,  at  150. 

Transaction  No.  16.  Sold  to  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  on  account,  1 
doz.  eggs,  360;  1  leg  of  spring  lamb,  4^  lbs.  at  200;  2  cans  French  peas,  at  150;  1  peck 
Irish  potatoes,  200. 

OCTOBER  6 

Transaction  No.  17.     Sold   to  W.   J.   Frazer,  767  W.   Madison   St.,    for  cash,    to  be 
deUvered,  1  can  lobster,  250;  1  bottle  Queen  Olives,  250;  2  loaves  Quaker  bread,  at  50. 
Transaction  No.  18.     Received  $5.00  from  Mrs.  Edwin  C.  Hedrick,  Jr.,  on  account. 
Follow  the  instructions  in  the  note  under  Transaction  No.  10. 

Transaction  No.  19.  Paid  The  American  Cereal  Co.,  9  Jackson  Boul.,  Chicago, 
$8.95,  the  amount  of  their  account  against  us,  from  the  Cash  Register. 

Record  this  in  the  Cash  Paid  Out  column  of  the  Cash  Register  Sheet.  Make  a  cash  book  entry  at 
this  time,  and  make  an  entry  in  the  day  book  debiting  The  American  Cereal  Co. 

Transaction  No.  20.  Sold  for  cash  6  cans  Heinz  baked  beans  and  tomato  sauce, 
at  150;  2  bottles  Heinz  tomato  catsup,  at  150;  5^  lbs.  Star  ham,  sliced,  at  280;  6  lbs.  Star 
ham,  butts,  at  120;  6  lbs.  Star  bacon,  sliced,  at  280. 

Transaction  No.  21.  Sold  to  Mrs.  Ward  N.  Seabury,  175  Forest  Ave.,  on  account, 
3^  lbs.  shoulder  lamb  chops,  at  140;  3  cans  French  peas,  at  150;  3  heads  lettuce,  at  120; 
50  lbs.  W.  C.  Superlative  flour,  at  50. 


xu 


SINGLE    ENTRY 


Transaction  No.  22.  Sold  to  Mrs.  Louis  N.  Mellick,  364  Euclid  Ave.,  on  account, 
one  spring  chicken,  4|  lbs-  at  20^;  2  lbs.  creamery  butter,  at  36^;  2  loaves  bread,  at  5^; 
3  cans  salmon,  at  150;  1  broom,  400;  1  bottle  bluing,  100;  3  bars  Naphtha  soap,  at  50. 

Transaction  No.  23.  Received  of  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  cash  in  full 
of  account,  $17.54, 

Transaction  No.  24.  Sold  to  Jas.  W.  Wilson,  317  Clinton  Ave.,  for  cash,  to  be 
delivered,  4  grape  fruit,  at  200;  3J  lbs.  Malaga  grapes,  at  200;  3  pkgs.  Cottage  cheese, 
at  150;  6  cans  assorted  soups,  at  300;  1  lb.  Young  Hyson  tea,  800;  2  qts.  Baltimore  oysters, 
at  350;  6  pkgs.  Saratoga  flakes,  at  150. 

Transaction  No.  26.  Sold  for  cash  3  lbs.  Finnan  haddie,  at  150;  2  lbs.  creamery 
butter,  at  360;  3  loaves  rye  bread  at  100;  1  sack  salt,  100;  3  heads  cabbage  at  100;  1  box 
Coleman's  mustard,  150. 

Transaction  No.  26.  Received  from  Mrs.  Edwin  C.  Hedrick,  Jr.,  124  N.  Kenil- 
worth  Ave.,  cash  to  balance  her  account,  $2.99. 

Transaction  No.  27.  Paid  the  salary  of  the  bookkeeper  and  cashier  (yourself)  for 
the  week,  $12.50,  from  the  Cash  Register. 

Record  the  payment  on  the  Cash  Register  Sheet,  in  the  column  headed  Cash  Paid  OvU.  Make  the 
proper  entry  and  explanation  in  the  cash  book. 

Post  to  the  ledger  all  day  book  entries  that  have  not  yet  been  posted;  rule  and  foot 
all  accounts  that  are  paid  in  -full.  Close  the  Cash  Register  Sheet  as  illustrated  and 
described  below. 


ILLUSTRATION    OF    CLOSING    OF    CASH    REGISTER    SHEET 


Footings 

** 
** 

** 
** 

**  ** 

*  ** 

*  ** 

0.00 
*  ** 

0.00 

**  ** 

• 

0.00 

**  ** 

Deduct  change 

Entered 

in  cash 

book, p 

* 

** 

** 
** 
** 

*  ♦* 

Spot  cash  sales 

**  ** 
*  ** 

Net  Chg.  Sales 

C.  0.  D.  cash  returns 
Cash  Rec'd.  on  Acct. 

age  — . 

Cash  Sales 
C.  0.  D.  Sales 

Total  cash  Rec'd. 
Cash  Pd.  out 

** 
** 

** 
** 

**  ** 

Total  Sales 

Excess  of  receipts 
Change  on  hand 

** 
** 

** 

Cash  in  register 
Deposit  Oct.  6,  19— 

*** 
** 

** 

** 

Change  in  register  Oct.  8,  19 — 

** 

** 

Rule  a  single  line  across  the  eight  columns  of  the  Cash  Register  Sheet,  underneath 
the  last  item  in  the  longest  column,  and  add  all  columns.  Then  proceed  as  follows:  (1) 
Deduct  the  amount  of  the  change  on  hand  Oct.  1  from  the  total  of  the  first  column.  The 
result  will  be  the  total  of  cash  sales.  (2)  Reconcile  the  three  C.  0.  D.  columns  (i.e.,  deter- 
mine whether  the  C.  0.  D.  Cash  Returns  and  the  C.  0.  D.  Goods  Returned  added  equal 
the  C.  0.  D.  Sales  Rule  these  columns  as  shown  in  the  model  form  and  write  the  amount 
of  the  C.  0.  D.  Cash  Returns  in  the  left-hand  column  of  the  Cash  Register  Sheet,  beneath 
the  total  of  spot  cash  sales.  (3)  Write  in  the  left-hand  column  the  amount  of  the  cash 
received  on  account  and  rule  a  double  line  across  the  Cash  Received  on  Account  column. 
(4)  Add  the  three  totals  now  shown  in  the  left-hand  column.  The  result  is  the  total  of 
cash  received.  (5)  Write  beneath  this  the  total  of  the  cash  paid  out,  and  deduct  it.  The 
result  is  the  excess  of  receipts  over  disbursements  for  the  week.     (6)  Add  the  amount 


SINGLE    ENTRY 


xm 


of  the  change  on  hand,  $67.60,  which  will  give  you  the  total  of  cash  in  the  cash  register. 
(7)  Deposit  $50.00,  keeping  $**.**  for  change.  Deduct  the  amount  of  the  deposit,  rule, 
and  carry  forward  the  amount  of  change  on  hand,  all  as  shown  in  the  model.  (8)  The 
only  columns  not  yet  ruled  up  are  the  Charge  Sales  and  Goods  Returned  on  Account  columns. 
Deduct  the  total  of  the  latter  column  from  the  total  of  the  former.  The  result  is  the 
net  chaise  sales.  Add  the  total  of  cash  sales  and  the  total  of  C.  0.  D.  paid  sales  to  the 
net  charge  sales,  to  show  the  total  of  all  kinds  of  sales  for  the  week.  (9)  The  total  of 
cash  received  during  the  week  must  be  entered  in  the  cash  book  and  a  notation  to  the 
effect  that  this  has  been  done  should  be  made  on  the  Cash  Register  Sheet,  as  shown.  The 
cash  payments,  it  will  be  observed,  have  alr^idy  been  entered  in  the  cash  book,  these 
entries  having  been  made  separately  as  the  transactions  occurred. 

In  business,  this  closing  of  the  cash  register  is  usually  done  daily.  The  report  on  business  done,  as 
shown  on  your  Cash  Register  Sheet  between  the  two  lines  extending  entirely  across  the  form,  is  usually 
prepared  on  a  special  daily  report  blank,  and  summaries  of  these  daily  reports  are  prepared  weekly  or 
monthly. 

When  your  Cash  Register  Sheet  has  been  approved  by  your  teacher,  write  the  amount 
of  change  on  hand  at  the  top  of  another  Cash  Register  Sheet,  giving  it  the  number  2,  and 
enter  the  transactions  for  the  week  beginning  Oct.  8. 


OCTOBER  8 

Transaction  No.  28.  Sold  for  cash  5  packages  Saratoga  Flakes,  at  15^;  3  packages 
Quaker  oats,  at  10^;  4  cans  Heinz  baked  beans  and  tomato  sauce,  at  150;  2  bottles  Queen 
olives,  at  250;  5  loaves  bread,  at  50. 

Transaction  No.  29.  Bought  for  cash,  from  the  Heissler  &  Junge  Co.,  301  W  39th 
St.,  Chicago,  100  loaves  Quaker  bread,  at  40,  paying  the  money  from  the  cash  register. 

Transaction  No.  30.  Sold  on  account  to  Mrs.  Wm.  Beye,  264  Wisconsin  Ave ,  2 
bottles  Heinz  tomato  catsup,  at  15^;  1  whole  Star  ham,  15  lbs.  at  260;  3  lbs.  Star  bacon, 
sliced,  at  280;  4  cans  Monarch  canned  corn,  at  150;  3  loaves  bread,  at  50;  3  bars  Ivory 
soap,  at  50. 

Transaction  No.  31.  Paid  $3.00  from  the  cash  register  for  one  year's  subscription 
to  the  Grocers'  Guide  and  Holly  Journal,  the  subscription  to  begin  with  the  November  issue. 

Transaction  No.  32.  Sold  on  account  to  Mrs.  Ward  N.  Seabury,  175  Forest  Ave., 
3  cans  Monarch  canned  peas,  at  150;  2  pks.  Northern  Spy  apples,  at  600;  4  pks.  Irish 
potatoes,  at  200  a  peck;  25  lbs.  W.  C.  Superlative  flour,  at  50;  1  bottle  bluing,  100;  2  lbs. 
Oswego  starch,  at  50;  2  doz    clothespins,  50. 

Transaction  No.  33.  Bought  on  account  of  Reid,  Murdock  &  Co.,  cor.  Lake  and 
Market  Sts.,  Chicago,  the  following  invoice  (the  explanations  in  parenthesis  do  not  appear 
on  the  face  of  the  bill): 


5  cs.  (cases)  Monarch    #2  com  (in  tins,  2  dz.  ea.) 

2   "  "         #2  E.  J.  (early  June)  peas  (in  tins, 

2  dz.  ea.) 
2   "  "         #1  Tall  salmon  (in  tins,  4  dz.  ea.) 

6  "  "         #3  Tomatoes  (in  tins,  2  dz.  ea.) 


Doz. 


10 

4 

8 

10 


Price 


$1.20 

1.75 
2.10 
1.35 


30  Days 


$16.80 


$16.80 


60  Days 


$12.00 

7.00 

13.50 
$32.50 


Total 


$49.30 


Xiv  SINGLE    ENTRY 

Transaction  No.  34.     Bought  of  The  American  Cereal  Co.,  Chicago,  111.,  on  account 
30  days, 

4  cases  Quaker  oats,  at  3.00  $12.00 

1  brl.  Oatmeal  5.50         $17.50 


Transaction  No.  35.  Sold  for  cash  1  leg  of  spring  lamb,  4|  lbs.  at  200;  2  cans  tall 
salmon,  at  27^0;  3  cans  E  J  Peas,  at  20^;  2  heads  lettuce,  at  120;  3  loaves  bread,  at  50; 
2  boxes  B  &  C  matches,  at  50. 

Transaction  No.  36.  Sold  to  Mrs.  Louis  N.  Mellick,  364  Euclid  Ave.,  on  account, 
2  cans  lobster,  at  250;  3  boxes  soda  crackers,  at  100;  1  bottle  olive  oil,  300;  2  lbs.  creamery 
butter,  at  360;  1  loaf  bread,  50;  1  sack  salt,  100. 

Transaction  No.  37.  Received  of  Mrs.  Chas.  P.  French,  157  S.  East  Ave.,  cash 
in  full  of  account. 

Find  the  balance  due  as  shown  by  the  ledger.  Note  the  date  of  the  last  purchase,  and  look  through 
the  day  book,  from  that  date  on,  to  find  whether  there  are  any  debits  and  credits  to  be  posted  to  her  account. 

Transaction  No.  38.  Sold  on  account  to  Mrs,  Wm.  Conant,  110  S.  East  Ave.,  2  lbs. 
creamery  butter,  at  360;  2  doz.  eggs,  at  360;  1  spring  chicken,  5^  lbs.  at  200;  6  grape  fruit, 
at  200;  2J  lbs.  Malaga  grapes,  at  200;  3  lbs.  cottage  cheese,  at  150;  2  bottles  Queen  olives, 
at  250;  3  loaves  bread,  at  50. 

OCTOBER  10 

Transaction  No.  39.  Sold  for  cash,  5^  lbs.  shoulder  of  lamb,  at  120;  2  lbs.  creamery 
butter,  at  360;  3  cans  E.  J.  peas,  at  200;  1  sack  salt,  100;  25  lbs.  W.  C.  Superlative  flour, 
at  50;  1  lb.  India  Ceylon  tea,  600. 

Transaction  No.  40.  Sold  C.  0.  D.  to  Mrs.  C.  V.  Clark,  789  Lake  St.,  4  lbs.  smelts, 
at  140;  1  bottle  Queen  olives,  250;  1  lb.  butter,  300;  3  loaves  rye  bread,  at  50. 

Transaction  No.  41.  Mrs.  Louis  N.  Mellick,  364  Euclid  Ave.,  returned  2  cans  of 
lobster  purchased  Oct.  8,  claiming  both  cans  were  spoiled. 

Enter  this  amount  in  the  Goods  Returned  on  Account  column  of  the  Cash  Register  Sheet.  Give  Mrs. 
Mellick  credit  in  the  day  book.  Make  out  a  credit  memorandum  as  follows:  "Oct.  10,  1910.  Credit 
Memorandum.     Mrs   Louis  N.  Mellick,  364  Euclid  Ave.     We  credit  your  account  500  for  2  cans  lobster 

returned.     F.  P.  Nissen  by  ."     Assuming  that  you  have  given  Mrs.  Mellick  one  copy  of  this, 

place  the  credit  memo  in  the  file  with  the  Charge  Sales. 

Note:  Many  retail  grocers  keep  the  customers'  charge  tickets  filed  alphabetically  under  the  customers' 
names.  This  makes  reference  easy  in  case  of  dispute.  Some  firms  keep  no  ledger,  but  rely  entirely  upon 
the  slips.  This  is  not  a  very  reliable  plan,  however,  unless  the  balances  are  carried  forward  from  one 
slip  to  the  next,  as  in  the  system  known  as  the  McCaskey  continuous  account  system.  When  this  system 
is  followed  any  payment  made  is  deducted  from  the  balance  shown  by  the  last  order  slip,  so  that  the  last  slip 
made  out  always  shows  the  balance  due.     The  slips  are  filed  alphabetically  under  the  customers'  names. 

One  system  that  is  sometimes  used  by  grocers  who  have  a  comparatively  small  number  of  customers 
is  as  follows:  One  charge  order  book  with  numbered  pages  is  kept  for  each  customer  who  has  an  account. 
When  a  charge  order  is  to  be  made  out,  the  clerk  secures  the  customer's  individual  book  and  writes  the 
order  in  it  direct,  or  else  he  hands  the  cashier  a  memorandum  of  the  filled  order  and  the  cashier  writes 
in  the  customer's  book.  One  copy  of  the  charge  slip  goes  with  the  goods,  while  the  other  copy  stays  in 
the  book.     The  balance  is  carried  forward  from  slip  to  slip,  as  in  the  system  described  in  the  last  paragraph. 

Transaction  No.  42.  Sold  on  account  to  Mrs.  Chas.  P.  French,  157  S.  East  Ave., 
1  doz.  eggs,  300;  2  lbs.  Clover  Leaf  creamery  butter,  at  360;  IJ  lbs.  Wisconsin  cream  cheese, 
at  260;  2  cans  Queen  Maud  sardines,  at  250;  1  doz.  oranges,  250;  8  qts.  new  Bermuda 
potatoes,  at  90. 


SINGLE    ENTRY  XV 

Transaction  No.  43.     Purchased    on   30  days'    credit   from   Armour   &  Co.,   239  S, 

Water  St.,  Chicago, 

12  Star  Hams,  180  lbs.  at  15^  $27.00 

16  pes.  Star  Bacon,  120  lbs.  at  22^  26.40         $53.40 


Transaction  No.  44.  Sold  to  Mrs.  Phillip  Furbeck,  1110  S.  Boulevard,  C.  O.  D., 
one  Star  ham,  15  lbs.  at  25^. 

Transaction  No.  45.     Sold  for  cash  3  lbs.    chopped  beef,   at    16^;  1  doz.   eggs,  300; 

2  lbs.  creamery  butter,  at  360;  25  lbs.  W.  C.  Superlative  flour,  at  50. 

Transaction  No.  46.  Sold  on  account  to  Mrs.  N.  N.  Richards,  154  Circle  Ave.,  Forest 
Park,  6^  lbs.  Star  ham  butts,  at  80;  1  can  Monarch  canned  corn,  150;  3  loaves  bread,  at 
50;  ^  lb.  butter,'  at  300;  2  lbs.  sausage  meat,  at  200;  3  bars  Naphtha  soap,  at  50. 

Transaction  No.  47.  Mrs.  N.  N.  Richards,  154  Circle  Ave.,  Forest  Park,  paid  $1.00 
on  account. 

Transaction  No.  48.  Sold  for  cash  3  lbs.  smoked  halibut,  at  250;  2  lbs.  imported 
Swiss  cheese,  at  400;  1  lb.  creamery  butter,  360;  3  loaves  bread,  at  50. 

Transaction  No.  49.  The  delivery  boy  returned  with  the  correct  amount  of  cash 
in  payment  of  the  C.  0.  D.  order  sold  to  Mrs.  C.  V.  Clark,  789  Lake  St. 

(See  the  note  under  Transaction  No.  13.) 

Transaction  No.  50.  The  delivery  boy  reported  that  no  one  was  at  home  when  he 
called  at  the  residence  of  Mrs.  Phillip  Furbeck  to  deliver  the  C.  O.  D.  order  He  there- 
fore brought  the  goods  back. 

Enter  the  amount  of  the  order  on  the  Cash  Register  Sheet  in  the  column  headed  C.  O.  D.  Goods  Returned. 
In  business  the  delivery  boy  would  bring  back  the  duplicate  order  slip  with  the  goods.  This  would  be 
marked  "Goods  Returned"  and  filed.  You  may  make  a  memorandum  of  the  goods  returned  (virtually 
a  «!opy  of  the  order  slip)  mark  it  "Goods  Returned,"  and  place  it  in  the  section  of  the  file  marked  C.  O.  D 
Goods  Returned. 

OCTOBER  12 

Transaction  No.  51.     Sold  to  J.  N.  Ward,  679  Chicago  Ave.,  for  cash,  to  be  delivered, 

3  grape  fruit,  at  200;  1  doz.  oranges,  400;  1  doz.  eggs,  300;  2  lbs.  creamery  butter,  at  360; 
2^  lbs.  Star  bacon,  sliced,  at  280;  3  pkgs.  Uneeda  biscuit,  at  50;  2  loaves  bread,  at  50. 

Transaction  No.  52.  Sold  to  Mrs.  C.  V.  Clark,  789  Lake  St.,  C.  O.  D.,  2  cans  Pride 
of  Chicago  tall  salmon,  at  180;  3  loaves  bread,  at  50;  1  8-lb.  box  prunes,  850;  1  lb.  India 
Ceylon  tea,  600. 

Transaction  No.  53.  Sold  for  cash  2  pks.  Northern  Spy  apples,  at  600;  3  pks.  Irish 
potatoes,  at  200;  25  lbs.  W.  C.  Superlative  flour,  at  50. 

Transaction  No.  5'i.  Sold  to  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  on  account,  1  leg 
of  spring  lamb,  4^  lbs.  at  200;  4  lbs.  Star  bacon,  sliced,  at  280;  3  heads  lettuce,  at  120; 
3  cans  E.  J.  peas,  at  200. 

OCTOBER  18 

Transaction  No.  55.  Sold  for  cash  1  lb.  India  Ceylon  tea,  600;  10  lbs.  sugar,  at  50; 
3  pkgs  Nabisco,  at  100;  3  pkgs.  Uneeda  biscuit,  at  50. 

Transaction  No.  56.  Sold  to  Mrs.  Chas.  P.  French,  157  S.  East  Ave.,  to  be  charged, 
3  grape  fruit,  at  200;  20  lbs.  sugar,  at  50;  2^  lbs.  Malaga  grapes,  at  200;  4  pkgs.  Nabisco, 
at  100. 


XVI  SINGLE    ENTRY 

Transaction  No.  67.  Mrs.  Ward  N.  Seabury,  175  iPores^  Ave.,  paid  her  account 
in  full. 

Read  the  note  under  Transaction  No.  37  for  directions  for  determining  the  amount  of  the  balance  due. 

Transaction  No.  68.  Sold  to  Mrs.  Edwin  C.  Hedrick,  Jr  ,  124  N.  Kenil worth,  on 
account,  to  be  delivered,  3^  lbs.  smoked  halibut,  at  16^,  1  whole  Star  harn,  15  lbs.  at  27^0; 
1  bottle  Heinz  tomato  catsup,  15^;  1  bottle  Queen  olives,  25^;  10  lbs.  granulated  sugar, 
at  5^;  1  lb.  butter,  30^;  3  loaves  bread,  at  50. 

Transaction  No.  69.     Bought  of  Reid,  Murdock  &  Co.,  on  thirty  days'  credit: 
3  half-chests  Young  Hyson  tea,  194#  at  350  $67.90 

2  cases  Monarch  coffee,  2#  cans,  96  lbs.  at  270  25.92 

2  cases         "         #2  E.  J.  peas,  4  doz.  at  $1.75  7.00 

3  cases         "         #10  peaches,  6  doz.  cans  at  $2.50  15.00         $115.82 

Transaction  No.  60.  Sold  for  cash  3^  lbs.  porterhouse  steak,  at  220;  2  lbs.  creamery 
butter,  at  360;  20  lbs.  sugar,  at  50;  3  loaves  bread,  at  50. 

Transaction  No.  61.    Took  from  the  cash  register  enough  money  to  pay  the  National 

Biscuit  Company's  account  in  full. 

This  payment  is  recorded  on  the  Cash  Register  Sheet  and  entries  are  made  iti  the  cash  book  and  in 
the  day  book,  as  explained  in  connection  with  previous  similar  transactions. 

Transaction  No.  62.  Sold  on  account  to  Mrs.  Ward  N.  Seabury,  175  Forest  Ave., 
4^  lbs.  rib  lamb  chops,  at  220;  1  bottle  mint  sauce,  250;  2  cans  E.  J.  peas,  at  200;  3  loaves 
bread,  at  50;  10  lbs.  granulated  sugar,  at  50;  25  lbs.  W.  C.  Superlative  flour,  at  5^.        , 

Transaction  No.  63.     Bought  of  H.  J.  Heinz  Company,  on  account: 

4  doz.  cans  apple  butter,  at  $1.50  $6.00 
3     "       "      peach        "       at     1.50  4.50 

6     "     small  crocks  strawberry  preserves,  at  $1 . 35  8.10         $18.60 

Transaction  No.  64.  Sold  for  cash  3  qts.  Baltimore  oysters,  at  350;  4  lbs.  oyster 
crackers,  at  90;  2  bottles  Heinz  tomato  catsup,  at  150;  10  lbs.  granulated  sugar,  at  50; 
25  lbs.  W.  C.  Superlative  flour,  at  50. 

Transaction  No.  65.     Sold  on  account  to  Mrs.  Phillip  Purbeck,    1110  S.  Boulevard, 

1  doz.  eggs,  300;  2  lbs.  creamery  butter,  at  360;  1^  lbs.  imported  Swiss  cheese,  at  400; 

2  loaves  rye  bread,  at  50;  3J  lbs.  Star  bacon,  sliced,  at  280. 

Transaction  No.  66.  Mrs.  Ward  N.  Seabury,  175  Forest  Ave.,  returned  1  bottle 
mint  sauce  purchased  today. 

See  Transaction  No.  41  for  instructions. 

Transaction  No.  67      Paid  the  scrub-woman  $1.50  for  her  work  today. 

Transaction  No.  68.     Paid  the  bookkeeper's  salary,  $12.50. 

Post  the  entries  in  the  day  book,  rule  up  any  ledger  accounts  that  balance,  foot 
and  close  the  Cash  Register  Sheet,  and  enter  on  the  cash  book  the  amount  of  sash 
received,  as  you  did  on  Oct   6.     Deposit  $50.00.     Close  the  cash  book. 

Single  Entry  Statement 

As  has  been  previously  explained,  it  is  impossible  to  show  the  separate  losses  and  gains  in  single  entry. 
A  loss  and  gain  statement  can  not  be  made  out.  A  financial  statement  can  be  made.  The  single  entry 
statement  sets  forth  the  assets  and  liabilities  of  the  business.  The  assets  are  listed  and  added.  Beneath 
these  the  liabilities  are  listed  and  added.  The  difference  between  the  total  assets  and  the  total  liabiHties 
is  the  net  capital  or  present  worth  of  the  business.  If  the  net  capital  at  some  previous  time  be  known, 
the  gain  or  loss  of  the  business  since  that  time  can  be  determined  by  comparing  the  net  capital  today  with 
what  it  was  at  that  time. 


SINGLE    ENTRY 


XVll 


Mr.  Nissen  asks  you  to  prepare  a  single  entry  statement  as  of  October  15.  He  tells  you  that  the  cash 
in  the  bank  is  $500.00.  You  know  how  much  money  there  is  in  the  cash  register.  Mr.  Nissen  values 
his  stock  of  groceries  on  hand  at  $5817.36,  his  horse  and  wagon  at  $270.00,  and  the  furniture  and  fixtures 
in  the  store  at  $450.00.  The  balances  of  all  accounts  receivable  and  payable  can  be  determinad  from 
the  ledger.     Prepare  a  statement  in  the  following  form: 

F.  P.  Nissen's  Single  Entry  Statement,  October  15,  19 — 

Assets 
Cash  in  bank 
Cash  in  cash  register 
Stock  of  groceries  on  hand  valued  at 
Horse  and  wagon  valued  at 
Furniture  and  fixtures  valued  at 
Mrs.  Wm.  Conant,  110  S.  East  Ave 
Mrs.  Chas.  P.  French,  157  S.  East  Ave. 

Total  Assets 

Liabilities 
Na'tional  Biscuit  Co.,  110  N  Morgan  St.,  Chicago 
The  American  Cereal  Co.,  9  Jackson  Blvd.,  Chicago 

Total  Liabilities 

Net  capital  or  present  worth 
Assets  October  1  j****  *♦ 

Liabilities  October  1  *** .  ** 


$500.00 
**  ** 

5817.36 

270.00 

450.00 

**_  ** 

*»  ** 


jj****  ** 


Net  Capital  October  1  **** .  ** 

Net  gain  $** .  ** 

In  order  that  the  proprietor's  account  in  the  ledger  shall  show  what  he  is  worth  at  all  times  it  will 
be  necessary  to  credit  him  with  the  amount  of  the  net  gain  as  shown  by  the  foregoing  statement.  There- 
fore you  will  make  a  day  book  entry  crediting  the  proprietor  for  the  amount  of  his  net  gain.  Post  this 
immediately  to  the  account  of  the  proprietor  in  the  ledger  and  close  the  account  with  a  bailance  as  of 
October  15. 

Changing  from  Single  Entry  to  Double  Entry 

The  process  is  very  simple.  Open  a  double  entry  journal  and  let  your  first  entry  be  a  journal  entry 
crediting  the  proprietor  for  his  total  assets  and  debiting  each  one  of  the  items  listed  in  the  statement  as 
assets.  This  will  necessitate  opening  accounts  with  Merchandise,  Horse  and  Wagon  and  Furniture  and 
Fixtures.  Make  another  journal  entry  debiting  the  proprietor  for  the  total  of  his  liabihties  and  crediting 
the  accounts  of  the  different  creditor  firms.  Next  open  a  double  entry  ledger  and  post  the  two  journal 
entries.  It  will  be  observed  that  your  double  entry  ledger  balances  will  correspond  in  detail  with  the 
single  entry  ledger  balances  except  that  in  the  double  entry  ledger  there  will  be  added  accounts  with  Mer- 
chandise, Horse  and  Wagon  and  Furniture  and  Fixtures.  Take  loose  sheets  of  journal  and  ledger  paper. 
Make  the  journal  entries  necessary  to  change  F.  P.  Nissen's  books  from  single  to  double  entry  on  Oct, 
15,     Post.     Take  a  trial  balance. 

In  order  to  see  even  more  clearly  how  single  and  double  entry  compare,  rewrite  F.  P.  Nissen's  business 
in  double  entry  form,  proceeding  as  follows:  (1)  Journalize  all  entries  appearmg  in  the  single  entry  day 
book  except  the  last.  It  will  not  be  necessary  to  perform  the  computations  again,  and  explanatory  matter 
may  be  omitted.  (2)  Journalize  all  entries  appearing  in  the  single  entry  cash  book  except  the  first,  third, 
and  eighth  entries,  which  you  have  already  journalized,  as  they  appear  in  both  day  book  and  cash  book. 
(3)  Post  all  journal  entries  to  regular  double  entry  ledger  sheets  (center  ruled).  (4)  Take  a  trial  balance. 
(5)  Make  statements,  using  the  inventories  of  Oct.  15  as  given  at  the  end  of  the  single  entry  set.  (6)  Close 
the  double  entry  ledger.  (7)  Now  compare  the  double  entry  statement  with  the  single  entry  statement. 
The  single  entry  ledger  should  agree  with  the  double  entry  ledger  as  far  as  it  goes.  Accounts  of  what 
class  do  not  appear  in  the  single  entry  ledger?     Name  them  in  detail. 


INDEX 


PAGE 

Abbreviations  used  in  Dry  Goods  Business 156 

Accounts  Classified 5,  63 

Account,  defined 5 

Advertising 117 

Advertising  account 153 

Ascertaining  Gain,  two  ways 124 

Assets,  defined 63 

Auxiliary  Books,  defined 35 

Bad  Debts,  Reserve  for 207 

Balancing  an  Account 8 

Balance  of  Balances 74 

Bank  Draft 119 

Bank  Proof 74 

Bank  Statement 74,  89 

Bill  Books 82,      83 

Bill  Book  Proof 91 

Billing 51 

Bill  of  Lading,  "Order" 163 

Bill  of  Lading,  "Straight" 115,  158 

Bookkeeping,  defined 5 

Bookkeeping,  Principles  of 138,  148 

Bookkeeping  Problems,  Supplementary 

6,  10,  14,  16,  19,  22,  25,  27,  31,  33,  64,  66,  70, 
91,  93,  124,  126,  135,  176,  178,  182,  192,    199 

Book  Values  and  Actual  Values 210 

Boot  and  Shoe  Business 150,  176 

Borrowing  Money 209 

"Briefing"  a  document 50 

Canceling  a  Note 62 

Cash  Account 7 

Cash  Book 95 

Cash  Book,  Three  Column 150 

Cash  Discount 144 

Cash  Discount  account 153 

Cashier 44 

Cash  Proof 57 

Charges  to  Expense  and  to  Capital 210 

Check  Book  Stub 47,  49 

Check,  Endorsement  of 54 

Check,  Illustration  of 48 

Checking  Debits  against  Credits 211 

Checking  the  Trial  Balance 43,  60 

Check  to  Currency 89 

Classification  of  Accounts 5,  63 

Classification  of  Books 34 

Closing  the  Ledger 71,  91,  123 

C.  O.  D.  account 153 

C.  O.  D.  Express 170 

C.  O.  D.  Freight 163 

Collecting  by  Draft 131 

Comparative  Statements 212 

Compromise  with  a  Debtor 129 

Computing  Interest 84 

Condensed  Statements 201 

Controlling  Accounts 205 

Correcting  Errors 179 

Corrections  and  Adjustments 202 

Cost  of  Goods  Sold 207 

Costs  and  Expenses  Subdivided 200 


Dating  Bills  Ahead 154 

Day  Book,  described 45 

Debit  and  Credit  sides  of  an  account 8 

Debiting  and  Crediting  accounts.  Rule  for 35 

Debiting  and  Crediting  Rules,  in  detail 137 

Depositing 45 

Discounts 144,  181 

Discount,  Cash 144 

Discount,  Trade 108,  118,  144 

Discount  for  Use  of  Money 145 

Discount  on  Exchange 145 

Discounting  a  Note  at  Bank 159 

Double  Entry,  defined 35 

Drafts 86,  131,  143 

Drafts,  Exercise  on 146 

Drafts,  Rules  for  Journahzing 144 

Drawer  and  Drawee 131 

Drawing  on  a  Slow  Customer 131 

Dry  Goods  Business 180,  198 

Duplicating  an  Order 160 

Endorsee 10 

Endorsement  of  Check 54 

Endorsement,  defined 10 

Endorsements,  Kinds  of 54,  55 

Endorser 10 

Errors  in  Trial  Balance 43,  179,  215 

Exchange 157 

Exchange,  Foreign 182 

Exercise  on  Drafts 146 

Expense  account 25 

Expense  Bill 108 

Explanatory  Journal 44 

Filing 45 

Final  Entry,  Book  of 34 

Financial  Accounts 63 

Financial  Accounts,  Condensed 201 

Financial  Statement 63,  121 

Finding  Errors 215 

Fire  Insurance  Policy 106 

F.  O.  B 115 

Forwarding  Footings 86 

Freight  account 153,  182 

Freight  Bill 108 

Gains,  defined 69 

Gain,  How  to  Determine 69,  124 

Goodwill 203 

Importing 182 

Income  or  Revenue  Statements 212 

Indexing  the  Ledger 66 

Insolvency  and  Bankruptcy 177 

Insurance  Policy,  Fire 106 

Interest  account 28 

Interest  and  Discount  account 152 

Interest,  Computing 84 

Inventories 18,  20,  23,  26,  91,  103,  206 

Investment  account 152 


XVlll 


INDEX 


XIX 


PAGE 

Investments 210 

Invoices,  How  made  out 51 

Jom-nal 35 

Journalizing  Exercises,  Supplementary .  76,  141,  168 
Journalizing  Rules 137 

Lease 49 

Ledger  accounts.  Posting  to 38 

Ledger,  defined 6 

Letter  of  Recommendation 102 

Liabilities,  defined 63 

Liability  Inventories 91 

Loss  and  Gain  account 31 

Losses,  defined 69 

Loss  or  Gain  accounts 63 

Loss  and  Gain  Statement 65,  122,  167 

Maker  of  a  note 10 

Merchandise  account 23 

Merchandise  Account  Subdivided 199 

Monthly  Statements 135 

Notes 10 

Notes  Payable  account 14 

Notes  Payable  Book,  See  Bill  Book. 
Notes  Receivable  Book,  See  Bill  Book. 

Notes  Receivable  account 11 

Notice  of  Freight  Received 108 

Opening  a  Set  of  Books 102 

Opening  the  Ledger 40 

"Order"  Bill  of  Lading 115,  163 

Order  or  Draft 87 

Original  Entry,  Books  of 34 

Partnership 135,  202 

Parties  to  a  Note 10 

Parties  to  a  Draft 131 

Part  Payments 128,  133 

Pass-Book 46 

Payee  of  a  Note 10 

Payee  of  a  Draft 131 

Paying  by  Check 48 

Payrolls 208 

Percentage  of  Profit 207 

Personal  accounts 17 

Petty  Cash  Sales 129 

Posting 38 

Posting  from  Sales  Book 79 

Posting,  Order  of 109 

Principles  of  Bookkeeping 138,  148 

Private  Ledger 204 

Problems,  Supplementary 

6,  10,  14,  16,  19,  22,  25,  27,  31,  33,  64,  66,  70, 

91,  93,  124,  126,  135,   176,   178,  182,  192,  199 

Promissory  Notes 10 


PAGE 

Proof  of  Statements 69 

Proprietor's  Account 33 

Proprietors'  Private  Accounts 203 

Purchase  Book 180 

Real  Estate  account 19 

Recapitulation  and  Summary  of  Definitions. . .   138 

Receipt 50,  62 

Receipting  an  invoice 58 

Reconcihation 209 

Reserve  for  Bad  Debts 207 

Review 137 

Review  Questions. 43,  76,  93,  126,  140,  216 

Rules  for  Journalizing 137 

Rules  for  Journahzing  Drafts 144 

Sales  Book 77 

Sale  Tickets,  How  Used 107 

Schedules 200 

Shipping 115,  158 

Shipping  C.  O.  D.  by  Express 170 

Shipping  C.  O.  D.  by  Freight 163 

Statements,  Comparative 212 

Statements,  Condensed 201 

Statements,  Financial 63 

Statements,  Income  or  Revenue 212 

Statements,  Loss  &  Gain 65,  167 

Statements,  Monthly  to  Customers 135 

Statute  of  Limitations 101 

Stock  Record 75,  123 

"Straight"  BiU  of  Lading 115,  158 

Student's  Weekly  Reports , 57 

Sundry  Debtors  account 153,  166 

Supplementary  Journahzing 76,  141,  168 

Supplementary  Problems 

6,  10,  14,  16,  19,  22,  25,  27,  31,  33,  64,  66,  70, 

91,  93,  124,. 126,  135,  176,   178,  |182,  192,  199 

Suspense  account 211 

Tax  Receipt 155 

Telegrams 1 14 

Terms  of  Sale 47,  156 

Three-Column  Cash  Book 150 

Trade  Discount 108,  118,  144 

Transaction,  defined 35 

Tracer 113 

Trial  Balance 42 

Transferring  Accounts  to  New  Ledger 103 

TripUcate  Bill  of  Lading 115,  158,  163 

Variable  Price  Lists,  Furniture  Business Ill 

Variable  Price  Lists,  Boot  &  Shoe  Business.. . .   158 
Variable  Price  Lists,  Dry  Goods  Business. .  185,  198 

Voucher  Bookkeeping 133 

Voucher,  Special  Form  of 132 

Weekly  Payrolls 208 


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